Markit/BME Germany Manufacturing PMI
German manufacturing sector remains in contraction in June.
Germany's manufacturing sector contracted further in June, according to the latest PMI® data from IHS Markit and BME. Weaker external demand and a slowdown in the auto industry continued to weigh on order books, which in turn led to declines in both output and employment. Sub-sector performances continued to vary, however, with growth in consumer goods contrasting with downturns in the intermediate and investment goods categories.
Elsewhere, input prices fell at a faster rate in June, dragged lower by a further reduction in buying activity and associated destocking efforts. Output expectations meanwhile turned positive for the first time in nine months, albeit remaining subdued by historical standards.
The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – showed a deterioration in overall business conditions for the sixth month in a row in June. At 45.0, up from 44.3 in May, the index was at a four-month high, but still well below the neutral 50.0 mark and close to its lowest since 2012.
The slight uptick in the PMI mainly reflected the new orders component, which showed the rate of decline easing for the third month in a row in June (albeit still running at a marked pace overall). A key weakness remained export sales, where there were reports of lower demand from Asia in particular.
Output fell at a solid and slightly accelerated rate in June. That said, the decline was still weaker than that of new orders. This resulted in a further decrease in backlogs of work, as well as a marginal rise in finished goods stocks.
On both the output and new order fronts, consumer goods manufacturers saw rates of growth quicken. This contrasted with a deepening downturn in the intermediate goods category, which saw the sharpest overall falls in production, new orders and employment. Makers of investment goods meanwhile recorded slower rates of decline.
Total manufacturing employment fell for the fourth month running in June, albeit at a slower pace than in May. Firms that reported lower staffing number often commented on the nonrenewal of temporary contracts and the nonreplacement of retirees.
Goods producers also reduced their purchasing activity in June, with the rate of decline unchanged from the marked rate recorded in May. This partly reflected destocking efforts, as firms reported lower production requirements and shortening lead times on purchases. Supplier performance in fact showed the greatest improvement since the height of the global financial crisis in 2009 amid reports of the emergence of spare capacity.
Falling demand for inputs meanwhile contributed to a second straight monthly decrease in purchases prices in June. Alongside reports of discounts from suppliers, there were also frequent mentions of lower steel prices. Output charges were meanwhile unchanged, ending a 33-month sequence of inflation.