IHS Markit/BME Germany Manufacturing PMI
German manufacturing remained in a strong expansionary phase
German manufacturing remained in a strong expansionary phase at the start of the second half of 2017, according to the July PMI survey data from IHS Markit and BME. Overall operating conditions improved at the softest pace in five months, albeit one that was still stronger than in any other period since April 2011. Output, new orders and employment all rose more slowly than in June, but at rates that were nonetheless strong. Suppliers remained under pressure, with lead times lengthening to the greatest extent since April 2011.
The headline IHS Markit/BME Germany Manufacturing PMI is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of the sector.
The PMI remained well above 50.0 in July at 58.1, down from 59.6 in June. This signalled a marked overall improvement in manufacturing business conditions, albeit the weakest since February. The downward movement in the PMI reflected softer increases in output, new orders and jobs, countered partially by higher input stocks and a greater lengthening in suppliers’ delivery times. The current 32-month period of overall growth is the second-longest in the 21-year survey history.
New business growth remained elevated. After having accelerated six times in the previous seven months, the rate of growth moderated to a five-month low in July but remained among the strongest seen over the past six years. New export orders continued to rise sharply, with demand reported from European and Asian (notably China) markets.
Production growth eased for the second month running to a six-month low, but remained strong. The current 51-month sequence of expansion is the longest observed since the survey began in April 1996. By sub-sector, the sharpest increase was registered in the consumer goods category.
The rate of growth in purchasing activity remained sharp in July, placing further pressure on supply chains. The degree to which input delivery times lengthened was the greatest since April 2011. In response to delays from suppliers, manufacturers built up safety stocks of raw materials and other inputs.
Manufacturing employment rose at one of the fastest rates over the past six years in July. Despite this, backlogs increased sharply.
Price pressures in the German manufacturing sector remained strong in the context of historic survey data in July. Input prices increased at a faster rate than in June, while output charge inflation slowed to a six-month low but remained sharp overall.
Output expectations remained firmly positive in July. The strength of sentiment eased since June but was still among the highest registered over the five-year history of the series. Companies linked growth forecasts to a booming economy, healthy order books and new projects.