03.07.2018 // Politics

Markit/BME Germany Manufacturing PMI

Manufacturing PMI at 18-month low in June as new order growth weakens.

The rate of growth of Germany’s manufacturing sector shifted down another gear in June, dampened by a further slowdown in the pace of expansion in new orders to the slowest for over two years. Picture: Pixabay.com The rate of growth of Germany’s manufacturing sector shifted down another gear in June, dampened by a further slowdown in the pace of expansion in new orders to the slowest for over two years. Picture: Pixabay.com

The rate of growth of Germany’s manufacturing sector shifted down another gear in June, dampened by a further slowdown in the pace of expansion in new orders to the slowest for over two years. Expansion in output remained solid but likewise eased at the end of the second quarter, with goods producers also becoming less optimistic about production in the year ahead. More positively, the rate of job creation in the sector picked up to a four-month high as efforts continued to be made to enhance capacity.

On the price front, factory gate charges rose at the slowest rate for eight months despite manufacturers facing an acceleration in input cost inflation.

The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – fell to 55.9 in June from 56.9 in May. The index has now declined in each of the past six months from a survey-record high last December, with the latest reading the lowest seen for one-and-a-half years.

The lower PMI figure was largely due to a further slowdown in the rate of expansion in new orders, which exhibited the weakest monthly rise since March 2016. Export sales growth was meanwhile at its lowest for over two years, with a number of surveyed firms commenting on fewer orders from the US and China.

The rate of output growth slowed less sharply than that of new orders, remaining solid overall thanks in part to a high level of backlogs of work at manufacturers. Latest data showed substantial gains in production across both the capital and intermediate goods groupings. In contrast, consumer goods production decreased for the first time in over three-and-a-half years, albeit only marginally.

The main positive takeaway from June’s survey was a pick-up in the rate of employment growth, up from a 15-month low in May to the highest since February. The pace of job creation was strong across each of the three main industrial groupings as firms looked to boost production capacity.

Goods producers continued to take on extra staff despite becoming less optimistic about the outlook for output in the year ahead. Business confidence was in fact at its lowest for over three years in June, having weakened for the fifth time in the past six months. A cooling market, tariffs and supply constraints were the main concerns among businesses, according to anecdotal evidence.

There was a steep rise in manufacturers’ input costs in June, with surveyed firms commenting on the impact of the recent euro depreciation and reporting higher prices paid for metals and plastics.

The rate of input cost inflation picked up to a fourmonth high in June; however, factory gate charges showed the weakest monthly increase since last October amid reports of strong competition.

Elsewhere, stocks of finished goods fell at the fastest rate for eight months, contrasting with a further slight rise in pre-production inventories. The extent to which supplier lead times increased was meanwhile the least marked since July last year.

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