Markit/BME Purchasing Managers’ Index, July 2011
Output growth in the manufacturing sector hit a two-year low in July, while new order levels dropped for the first time since June 2009. As a result, the seasonally adjusted Markit/BME Germany Purchasing Managers’ Index(PMI) – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – dropped for the third month running and to its lowest since October 2009. At 52.0 in July, down from 54.6 in the previous month, the PMI was more than 10 index points lower than the survey-record high seen in February (62.7).
Manufacturing companies signalled a further sharp loss of output growth momentum in July, with the latest rise in production levels the slowest for two years and weaker than the long-run survey average. Sector data pointed to higher levels of intermediate goods production, but lower levels of consumer and investment goods output.
Softer overall growth of manufacturing production reflected a fall in new business volumes in July. The decline in incoming new work ended a two-year period of continuous expansion. Latest data also highlighted a reduction in export sales, with the pace of contraction the fastest since June 2009. Anecdotal evidence from survey respondents generally linked the fall to weaker business confidence, delays in spending decisions and concerns among clients about the global economic outlook.
Reduced levels of new business contributed to a stagnation of backlogs of work in July. This ended a 21-month period of rising levels of outstanding business in the German manufacturing sector. Manufacturers nonetheless recorded a robust rate of job creation in July, extending the current period of employment growth in the sector to 16 successive months.
Meanwhile, latest data also pointed to a slight fall in input buying, which contrasted with the robust growth seen throughout the past year-and-a-half. This decline in purchasing activity did not prevent a solid rise in pre-production inventories in July, which increased at only a slightly weaker pace then the survey-record high seen in June 1998.
Manufacturers suggested that the build-up of inventories of inputs reflected the receipt of previously-delayed orders from suppliers, as well as weaker-than-expected workloads at their plants. July data indicated that the latest lengthening of vendor delivery times was the least marked for 22 months. Survey respondents linked this to weaker market demand than in June, while some firms commented on improved availability of inputs from Japan.
Manufacturers also noted that a slowdown in global demand for raw materials contributed to weaker input cost inflation in July. Although the latest index reading still pointed to substantial cost pressures, the rate of input price inflation was the slowest for a year-and-a-half. This in turn meant that manufacturers’ charges at the factory gate rose at a less marked pace than in June. Moreover, the latest increase in average output prices was the slowest for eight months.
Quelle: Markit/BME
