Manufacturing growth in Germany slowed further in February, according to latest survey data.
The final seasonally adjusted Markit/BME Germany Manufacturing Purchasing Managers’ Index® (PMI® ) – a single-figure snapshot of the performance of the manufacturing economy – dropped from January’s 52.3 to a 15-month low of 50.5, thereby signalling only a fractional improvement in operating conditions.
Downward contributions to the headline PMI came from all five sub components. Subdued demand from both the domestic and foreign markets was one of the reasons behind the manufacturing slowdown in February, with total new orders and new export orders both rising at the weakest rates in seven months. Sector data suggested that much of the weakness was centred around the intermediate goods sector. Output also increased at a slower pace during the month, with the latest increase in fact the least marked in over a year.
Production growth was particularly sluggish at consumer and intermediate goods manufacturers. With output and new orders rising at weaker rates, companies were more cautious about their payroll numbers in February. This was signalled by the first reduction in workforce numbers since August 2014. The rate of job shedding was only marginal, however. Business outstanding at German manufacturers rose for a thirteenth month running, although the rate of accumulation was the weakest since last July.
Meanwhile, post-production inventories fell at a slightly weaker rate than in January. February saw input costs fall further, as low energy and raw material prices continued to exert downward pressure on overall costs. Moreover, the rate of deflation accelerated and was the sharpest since the financial crisis, with more than one-third of panellists reporting a drop. In response to lower input costs, some companies lowered their selling prices.
Moreover, factory gate prices fell to the greatest degree since June 2013. Latest survey results highlighted a near-stagnation of buying activity, with the latest increase the least marked in the current 12-month period of growth. This was partly attributed by panellists to subdued new order growth and destocking efforts. Consequently, stocks of purchases declined further, and at the fastest pace in two-and-a-half years.
