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Manufacturing PMI falls to lowest since July 2012 in Germany

Christian Fernsby ▼ | April 2, 2019
Germany's manufacturing sector sank deeper into contraction at the end of the opening quarter, with latest PMI survey data from IHS Markit and BME signalling faster decreases in output, new orders and export sales.
Germany's manufacturing
Europe   There were signs of sluggish demand and an uncertain outlook
There were signs of sluggish demand and an uncertain outlook affecting firms' employment decisions, as payroll numbers fell for the first time in three years.

The report also highlighted easing supply-side pressures, with input lead times improving to the greatest degree since mid-2012 and purchase prices rising at the slowest rate in over two-and-a-half years.

The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – dropped sharply in March to 44.1 from 47.6 in February.

This was the lowest reading since July 2012 in the midst of the eurozone sovereign debt crisis, and also below the preliminary 'flash' figure of 44.7.

The deterioration in performance was underpinned by a sharp and accelerated decrease in new orders, which was in turn partly driven a further slump in export sales.

Both total order books and new business from abroad fell at the fastest rate since April 2009.

Uncertainty surrounding Brexit and trade tensions, a weak automotive sector and generally softer global demand were all identified as factors leading to lower sales.

Accordingly, latest data showed a marked decrease in output, with the rate of decline accelerating since February – when production fell for the first time in almost six years – to the quickest in over six-and-a-half years.

A contraction in output was recorded across each of the three broad industrial categories, with makers of intermediate goods recording the steepest fall, followed by capital goods producers.

Manufacturers' backlogs of work fell for the seventh straight month and at the fastest rate since mid-2009.

This lack of pressure on capacity was reflected in a drop in employment across the sector – the first such fall in three years.

The decline was only marginal, but it nevertheless contrasted with solid rates of job creation in prior months.

There were several mentions of the non-renewal of temporary contracts.

Manufacturers' growing reluctance to extend contracts also reflected a further weakening of confidence towards the outlook for output.

Sentiment on this front was the most pessimistic since November 2012.

Elsewhere, latest data showed a further easing of inflationary pressures.

Output charges increased at the slowest rate since November 2016, while input costs barely rose, recording the smallest monthly increase in over two-and-a-half years.

A fall in steel prices was one of the main factors weighing on overall cost increases.

The slowdown in input cost inflation partly reflected reduced purchasing activity among German manufacturers.

Buying levels fell sharply, contributing to a reduction in stocks of inputs – the third in the past four months – and a marked improvement in supplier delivery times.