German manufacturing stuck in contraction in August: PMI

GERMANY’S manufacturing sector contracted for a second month in a row in August, as ongoing economic uncertainty and strong inflation helped lead to a sustained decline in new orders, a survey showed on Thursday (Sep 1).

S&P Global’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Germany’s economy, fell to 49.1, its lowest reading in more than 2 years, from July’s reading of 49.3.

A reading below the 50 mark indicates contraction.

A Reuters poll of analysts had pointed to a reading of 49.8.

An index of new orders ticked up only slightly to 40.9 from the previous month’s 40.1, which was the lowest reading since May 2020.

Businesses surveyed noted that uncertainty and high prices had led to greater hesitancy. A number of firms noted that high stock levels among clients had also weighed on demand.

“New orders continued to show a steep decline, albeit from historically high levels, with economic uncertainty and strong inflation both acting to suppress sales volumes,” said Phil Smith, economics associate director at S&P Global Market Intelligence.

“Many manufacturers are accumulating stocks of finished goods as sales disappoint, which is a downside risk to the sector’s performance in the coming months as these firms look to bring output more into line with demand and scale back their purchasing activity accordingly,” added Smith. REUTERS