04.09.2018 // Politics

Markit/BME Germany Manufacturing PMI

Germany Manufacturing PMI falls in August amid slowdown in new order growth.

In August, the EMI was again above the growth threshold of 50 points. Picture: Pixabay.com In August, the EMI was again above the growth threshold of 50 points. Picture: Pixabay.com

The German manufacturing sector saw robust increases in both output and employment in August, though signs of weakness in new orders and concerns towards global geopolitics weighed on firms' expectations towards growth in the year ahead, according to the latest PMI® survey data from IHS Markit. Notably, new export orders showed the weakest rise for over two years.

The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – fell back to 55.9 in August, down from 56.9 in July and its joint-lowest reading in the past year-and-a-half (alongside that seen in June).

Production growth remained strong at the midway point of the third quarter, with the rate of increase in output little-changed from that seen in July. New orders, however, rose at a much weaker rate by comparison, which partly reflected the slowdown in export sales growth to the weakest since May 2016. Accordingly, stocks of finished goods increased for the first time in eight months, while the rate of backlog accumulation slowed to the weakest for over two years.

As well as sustained robust output growth, August also saw a further marked increase in the level of employment across the goods producing sector. Concurrently, higher production requirements led to a further increase in manufacturers' buying levels, which displayed the strongest rate of growth for four months.

Elsewhere, latest data showed a further steep increase in average purchase prices paid by German goods producers. The rate of inflation dipped to the weakest since April but remained well above the historical average. Steel and oil were some of the main drivers of the increase in costs, according to anecdotal evidence, while there were also reports of pressure in supply chains leading to higher input prices.

Goods producers continued to face delays in the delivery of purchased items during August, although the extent to which lead times lengthened was the least marked for 15 months.

Higher costs were meanwhile often passed on at the factory gate, with manufacturers raising selling prices for the twenty-fourth month in a row. The rate in output charge inflation in August was the highest seen for three months.

German manufacturers generally remained optimistic about the outlook for output, with new products and a growing economy expected to support expansion in the year ahead. That said, the degree of confidence softened slightly since July and was among the lowest seen in over three years, as a number of businesses raised concerns over global geopolitics and, in particular, the imposition of tariffs.

By main industrial grouping, the best performing area was the capital goods sector, while makers of consumer goods reported falls in both output and new orders.

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