Downturn in German manufacturing suffers fresh setback, PMI shows
Companies are, however, more optimistic about future economic conditions over the next 12 months
THE downturn in Germany’s manufacturing sector, which accounts for about a fifth of Europe’s biggest economy, experienced a fresh setback in June as output and new orders declined at a faster pace, a survey showed on Monday (Jul 1).
The Hamburg Commercial Bank (HCOB) final Purchasing Managers’ Index (PMI) for German manufacturing fell to 43.5 in June from 45.4 in May. The index, which remains below the 50 level, confirms a preliminary flash estimate and represents a contraction in the sector.
“The accelerated fall in new orders and especially export orders indicates that we will have to wait some more months until a recovery in the manufacturing sector can be seen,” said Cyrus de la Rubia, chief economist at HCOB.
One likely explanation for the weak exports orders is increasing competition from China, which is ramping up its exports worldwide due to sluggish domestic demand, he added.
“This situation creates a double whammy for German exporters,” de la Rubia said, noting businesses were facing fewer exports to China at the same time as heightened competition from Chinese products, especially in emerging markets.
The destocking cycle showed no signs of turning as companies reported deepening declines in both pre- and post-production inventories.
However, companies were more optimistic about the future than they were in May, with sentiment hitting the highest since February 2022.
Anecdotal evidence highlighted hopes of a pick-up in exports, increased investment and a general improvement in economic conditions over the next 12 months.
On the price front, demand weakness continued to put downward pressure on both input costs and factory gate charges. However, the respective rates of decline did ease slightly, the survey showed. REUTERS
Share with us your feedback on BT's products and services
