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German manufacturing growth hits near three-year high in December

Staff Writer | January 3, 2017
Germany’s manufacturing sector was buoyant at the end of 2016.
German manufacturing
German economy   Markit/BME Germany Manufacturing PMI
The seasonally adjusted Markit/BME Germany Manufacturing Purchasing Managers’ Index (PMI) rose from 54.3 in November to a 35-month high of 55.6.

With solid growth also signalled in October, December’s reading meant that the fourth quarter average (55.0) was the highest in nearly three years.

Underpinning the overall improvement in operating conditions were marked expansions of output and new work. New business increased for the twentyfifth consecutive month, with the rate of growth only just below the record over that period.

Stronger client demand persuaded German manufacturers to raise their output at a quicker pace. The latest rise in production was the sharpest since July. All three market groups finished the year in growth territory.

Both output and new work rose in each sector, with the sharpest expansions seen in intermediate goods, closely followed by capital goods. Growth at consumer goods producers was comparatively modest.

The rise in total new orders across the manufacturing economy was bolstered by greater exports in December. Though easing since November, the rate of growth was solid overall.

There were reports of new contract wins in Asia, Europe and the US. A sharp accumulation of backlogs was a by-product of improving demand in December. The latest rise was the most marked since the start of 2014.

German goods producers engaged in hiring as part of efforts to relieve such pressure on operating capacity and prepare for further sales in 2017.

The rate of job creation was above the 2016 average, despite easing for the second straight month. Purchasing activity meanwhile rose substantially in December.

The pace of expansion was the fastest in over five-and-a-half years. Pre-production inventories returned to growth as a result, following more than two years of either stagnant or falling input stocks.

Rising demand for inputs also led to pressure on supply chains. Average lead times lengthened to the greatest extent since mid-2011.