IHS Markit/BME Germany Manufacturing PMI
Manufacturing growth regains momentum.
German manufacturing posted a stronger performance in August following July’s slight loss of momentum, according to the latest PMI® survey data from IHS Markit and BME. Overall operating conditions improved at a pace close to the six-year highs seen in May and June. Output, new orders and new export business all rose more sharply than in July, with the latter expanding at the fastest rate since May 2010. 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 rose to 59.3 in August, from July’s five-month low of 58.1. This was the thirdhighest level since April 2011, and signalled a marked overall improvement in manufacturing business conditions in the manufacturing sector of the eurozone’s largest economy. The upward movement in the PMI reflected faster increases in output and new orders as well as a greater lengthening in suppliers’ delivery times. The current 33-month period of overall growth is the second-longest in the 21-year survey history.
The volume of new orders received by German manufacturers rose for the thirty-third successive month in August. The rate of expansion quickened from July and was the third-strongest since April 2011, driven by the intermediate goods sector. Notably, new export orders rose at the fastest pace since May 2010. Strong demand from Asian markets was reported.
Manufacturers raised output to meet order books. The rate of growth rebounded since July and was the third-fastest since January 2014. This reflected the trends in the intermediate and investment goods sectors, as growth of consumer goods output slowed. Meanwhile, employment and purchasing continued to expand at historically sharp rates.
Despite the faster rise in production, backlogs of work increased at the strongest pace since April 2011. This partly reflected growing pressure on supply chains, as input delivery times lengthened to the greatest extent since the same period. Post-production stocks declined at a sharper rate as a result.
August data signalled stronger inflationary pressures in the manufacturing sector. Input price inflation rose to a three-month high, albeit one that was weaker than those seen between December 2016 and May 2017. Meanwhile, output prices increased at a rate that almost equalled February’s 68-month record.
Manufacturers remained strongly optimistic regarding expected future output levels. The strength of sentiment remained among the highest registered since the series began in mid-2012.