Markit/BME Germany Manufacturing PMI
Manufacturing PMI slide extends into fourth quarter as order books move into contraction.
New orders placed with German manufacturers decreased in October, causing overall growth in the sector to slow to its weakest in nearly twoand-a-half years, latest PMI® survey data from IHS Markit showed. Order books fell for the first time since late-2014 to end a record sequence of growth. Firms linked the slowdown to troubles in the automotive sector and hesitancy among foreign clients, reporting slower increases in output and employment as a result. Moreover, production is expected to fall in the next 12 months, the first sign of pessimism among manufacturers for four years.
The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – fell for the third month running in October, from 53.7 in September to a 29-month low of 52.2. The Index remained above the 50.0 no-change mark thanks in part to increases in output and employment, though growth slowed on both fronts.
The rise in production in October was only marginal and the weakest seen since November 2014. Output was supported somewhat by clearing backlogs of work, the level of which fell for the second month in a row. It marked the first time that back-to-back declines have been recorded since 2013.
Inflows of new work fell into contraction in October, having risen continuously on a monthly basis since December 2014. The decline was centred on the intermediate and capital goods sub-sectors.
Underpinning the reduction in total inflows of new business was a second straight monthly fall in export sales. Manufacturers faced the sharpest drop in new business from abroad for over five years, citing increased hesitancy among international clients.
Manufacturers' buying levels fell accordingly, ending a sequence of growth in purchasing activity stretching back to early-2015. Supplier delivery times continued to worsen, though the drop in demand for inputs helped relieve some pressure and the deterioration in performance was the least marked since February last year.
One of the areas where the manufacturing sector continued to see growth was employment. The latest rise in workforce numbers was again solid by historical standards, with all three main industrial groupings contributing to the increase. That said, the pace of job creation moderated further from strong rates seen early in the year to the slowest since February 2017.
Elsewhere, latest data showed an intensification of cost pressures as input price inflation rebounded from a 12-month low in September. Manufacturers highlighted increases in the cost of electronics, energy, oil derivatives and steel. Output prices, however, showed the smallest rise since July last year.
Finally, October saw manufacturers' expectations for output in the year ahead turn negative, reflecting concerns over a slowing economy, issues across the car industry and geopolitical frictions.