New orders increased for the twenty-first successive month

May’s NTC/BME Purchasing Managers’ Index (PMI) survey signalled an improvement in operating conditions in the German manufacturing sector for the twenty-first consecutive month, driven by further robust rises in output, new orders and employment. At 56.1 in May, down from 57.0 in the previous month, the PMI remained comfortably above the 50.0 no-change mark and was higher than its long-run average (52.5).
Panellists signalled that staff recruitment in May reflected company expansion plans, with high order intakes encouraging them to raise production capacity. Employment growth remained broad-based across the sector and, measured overall, was the second-highest for more than six-and-a-half years.
Despite easing to a seventeen-month low in May, output growth remained robust and above its long-run survey average. Higher levels of production continued to reflect increased workloads in the sector, with incoming new business up for a twenty-first successive month (the longest sustained period of expansion since mid-1999 to early 2001). Volumes of new orders improved across all three market groups, with investment goods producers again reporting the strongest growth.
Latest survey data pointed to a robust rise in factory gate prices, with the rate of inflation accelerating on the month. A number of firms commented that strong market demand had allowed them to push through increased charges in May. Data also indicated a sharp rise in average input costs, which was largely driven by higher metal prices in May. That said, the rate of inflation eased to its least marked for fourteen months.

The PMI has been published since 1996 under the auspices of AMMPL (BME), while production has been in the hands of the British media group NTC Research (Henley-on-Thames). The representative index is based on polling of 500 purchasing managers or managing directors from business enterprises in the German processing industry. The validity of the purchasing manager index is indisputable: the European Central Bank (ECB) has explicitly emphasized its informational content.