Markit/BME Purchasing Managers’ Index, May 2011
May data pointed to a sharp slowdown in German manufacturing growth, following an exceptionally strong expansion in the previous month. This was highlighted by a fall in 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 – to 57.7, from 62.0 in April and the lowest reading for seven months. Slower output and new order growth were the main reasons for the reduction in the headline PMI in the latest survey period.
Manufacturers in Germany indicated a rise in production levels for the twenty-third consecutive month during May. Although the rate of expansion remained well above the long-run series average, the latest increase in output was the slowest since November 2010. Latest data indicated that the sharpest moderation in output growth was in the consumer goods sector. Investment goods producers meanwhile continued to register the sharpest increase in output.
New business intakes increased at a solid pace in May, but the rate of expansion slowed for the third month running to its weakest since September 2010. All three market groups monitored by the survey reported a moderation in new order growth. In some cases, firms noted that higher output charges had an adverse impact on client demand in May.
Slower new export order growth also contributed to the overall moderation in new business expansion. The latest rise in new work from abroad was the weakest for six months. Companies that reported an increase in new orders from export clients generally attributed this to strong demand in emerging markets.
Employment growth was relatively resilient in May, with the rate of job creation in the manufacturing sector continuing to ease slightly from the survey-record high registered during March. Sharp increases in staffing levels at intermediate and investment goods companies contrasted with a stagnation in workforce numbers in the consumer goods sector.
Average input prices continued to rise sharply in May, reflecting higher costs for energy and a range of raw materials. Some firms noted that shortages of stock at suppliers had contributed to higher cost burdens. However, the rate of input price inflation was much lower than in April and eased to its slowest for six months. A moderation in average input cost rises led to a drop in output charge inflation from April’s survey-record high. Although still strong, the latest increase in factory gate prices was the slowest for four months.
Purchasing activity in the German manufacturing sector rose at the slowest pace since November 2010. Supplier lead-times nonetheless continued to lengthen sharply in May. Vendor performance has now deteriorated for twenty-two consecutive months. Survey respondents widely commented on shortages of stock at suppliers in May. There were also reports that disruptions from the earthquake in Japan had an adverse impact on supplier lead-times.
