Markit/BME Germany Manufacturing PMI
Manufacturing PMI drops to lowest since June 2009
Germany's manufacturing sector recorded its worst performance since the depths of the global financial crisis in September, latest PMI® data from IHS Markit and BME showed, as contractions in output and new orders accelerated. Job shedding also intensified, with factory employment falling to the greatest extent for almost a decade.
Elsewhere, the survey revealed a growing number of firms cutting output prices amid increasing competitive pressures, and a sustained decline in the cost of raw materials.
The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy derived from indicators for new orders, output, employment, suppliers' delivery times and stocks of purchases – registered 41.7 in September, down from 43.5 in August and its lowest reading since June 2009.
A breakdown of the data by main industrial grouping showed that investment goods was the worst-performing category during the month, followed by intermediate goods. Notably, consumer goods producers joined their counterparts in recording a contraction.
September saw output fall for the eighth month in a row. Moreover, the rate of decline accelerated and was the quickest since July 2012. New orders fell even faster, however, dropping to the greatest extent since April 2009 and leading to a further reduction in backlogs of work. Firms that reported a decrease in new business commented on clients postponing, scaling down and even cancelling orders, often due to uncertainty about the outlook. A key factor remained lower export sales, which continued to fall at a sharp rate, albeit one that was unchanged from August.
Manufacturers showed an increased willingness to reduce workforce numbers during September, with the pace of staff shedding accelerating to the quickest since January 2010. Sector employment has now fallen for seven months in a row, with the latest round of job losses again largely centred on contractors.
With production requirements decreasing and efforts being made to reduce stocks accordingly, manufacturers' buying levels also fell sharply in September. This in turn help to free up capacity at suppliers, resulting in an eighth consecutive monthly improvement in lead times on purchases.
Another upshot of the decrease in demand for inputs was a drop in prices paid, as suppliers continued to compete over price. The rate of decline in input costs eased since August, but was still the second-quickest seen since April 2016. The drop in input prices and competition for new work also saw manufacturers cut output charges in September. The extent of the discounting was the most marked for threeand-a-half years.
Lastly, latest data revealed that manufacturers remained strongly pessimistic about the outlook in September. That said, expectations were slightly higher than the seven-year recordlow seen in August.