German manufacturing contracts sharply in March

THE downturn in Germany’s manufacturing sector, which accounts for about a fifth of the country’s economy, continued at the end of the first quarter, a survey showed on Tuesday (Apr 2).

The HCOB final Purchasing Managers’ Index (PMI) for manufacturing fell to 41.9 in March from 42.5 in February. The reading was slightly above the flash estimate of 41.6 but far below the 50 level that separates growth from contraction.

“Germany’s manufacturing sector has been mired in recession since around the middle of last year, and the latest PMI readings signal another contraction in the first quarter of 2024,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Weak demand contributed to further factory job losses and a sustained draw-down of pre-production inventories, the survey showed. There was also more discounting among manufacturers amid strong competition for new work.

The drop in the headline PMI in March did, however, mask slower decreases in both new orders and output.

Looking ahead, manufacturers expressed optimism about growth prospects in the next 12 months. Surveyed businesses signalled hopes of a pick-up in demand, especially in the second half of the year.