Markit/BME Purchasing Managers’ Index, March 2011
March data signalled a strong improvement in business conditions across the German manufacturing sector. At 60.9, down from 62.7 in February, 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 – was above the neutral 50.0 value for the eighteenth consecutive month. Although the latest reading was lower than last month’s series record high, it remained much stronger than the long-run average (52.2). Moreover, the employment component signalled the steepest rate of manufacturing sector jobs growth in the fifteen-year survey history.
Manufacturers indicated a steep increase in production levels in March, despite the rate of expansion easing to a four-month low. The slowdown largely reflected weaker output growth in the consumer and investment goods sectors. New business volumes also rose strongly in March, but at a slower pace than that recorded during February. Higher levels of incoming new work were supported by an acceleration of export order growth to its sharpest since May 2010. Anecdotal evidence from survey respondents frequently cited an upturn in demand from clients in China and the US.
Increased workloads contributed to additional backlog accumulation across the manufacturing sector in March, with unfinished business rising for the eighteenth consecutive month. Some firms noted that efforts to alleviate pressure on operating capacity resulted in reduced inventories of finished goods. Latest data showed a decline in post-production stocks for the third month running, with the rate of reduction the fastest since October 2010.
Companies in the German manufacturing sector continued to recruit extra staff at a sharp pace in March. Moreover, a new survey record expansion of employment numbers was recorded for the fourth month in a row. Jobs growth was broad-based across the three market groups monitored by the survey, with investment goods producers reporting the fastest increase in workforce levels.
Greater production requirements also led to a sharp increase in input buying during March. The current period of rising purchasing activity now extends to a year-and-a-half. Pre-production inventories meanwhile increased at a solid pace, which some survey respondents attributed to efforts to build safety stocks in response to supply chain delays.
March data showed a further steep lengthening of vendor lead times, but the latest deterioration of supplier performance was less marked than in the previous month. Manufacturing firms mostly linked longer delivery times to strong global demand for raw materials. There were only sporadic reports of delays in the receipt of inputs relating to the earthquake in Japan.
Latest data pointed to a steep increase in average input costs, although the rate of inflation eased from February’s survey record high. Strong cost pressures resulted in the steepest rise in factory gate charges since January 2007.
