Markit/BME Germany Manufacturing PMI
Manufacturing output growth slows to 15-month low.
Germany’s manufacturing sector continued to lose momentum in March, with output growth slowing for the third consecutive month, according to the latest PMI survey data from IHS Markit and BME. Goods producers meanwhile faced another recordincrease in average delivery times for inputs – thethird in the past four months.
The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – registered a reading of 58.2 in March, down from 60.6 in February. Although still signalling a strong overall improvement in business conditions within the goods-producing sector, the latest figure was the lowest since July 2017 and well below that seen at peak of the upturn last December.
Output growth in fact eased to the weakest seen since December 2016, with production increasing at a slower rate across each of the main industrial groupings: consumer, intermediate and investment.
There were some reports of output being affected by an unusually high level of sickness absence. More importantly, however, the survey highlighted a softer trend in new orders amid reports of capacity constraints and strong competition. Although remaining solid in the context of historical data, new order growth was at a 16-month low in March. Part of the reason for this was a slower increase in new export orders, which showed the weakest rise since January 2017.
Manufacturers scaled up their purchasing activity during March as they looked to keep pace with new orders. However, this added further pressure to already-stretched supply chains, with latest data showing a new record increase in average input delivery times to follow those seen in December and February. Delays were linked not only to capacity constraints among suppliers but also a shortage of items, including electronics and steel, and a lack of available transporters.
Strong demand for inputs continued to manifest itself in higher purchase prices. The rate of input cost inflation eased to a five-month low, but it remained elevated. The main drivers of the increase were metals, and in particular steel, alongside electronics, plastics and wood products.
Sustained strong cost pressures led manufacturers to raise their output prices again in March. The rate of factory gate price inflation remained among the highest seen in the survey’s 22-year history despite pulling back slightly from that seen in February.
On a more positive note, March saw a further marked increase in the level of factory employment. The rate of job creation was weakest in seven months but still one of the highest seen since 2011.
The survey did, however, show a weakening of optimism towards the year-ahead outlook for output to its lowest for 18 months, with firms reporting concerns about the sustainability of the current high level of demand and cost pressures.