Germany: Manufacturing PMI weakens further in July
The HCOB Germany Manufacturing Purchasing Managers’ Index (PMI) fell to 43.2 in July from June’s 43.5. As a result, the index moved further below the 50.0 no-change threshold, signaling a faster deterioration in manufacturing-sector operating conditions compared to the previous month.
July saw an accelerated reduction in output due to persistent demand weakness. Moreover, new orders fell at the sharpest pace in three months due to client hesitancy and a lack of new work from the construction sector. Additionally, employment fell for the 13th consecutive month, with the pace of job shedding the quickest since March, as firms attempted to adjust to the reduced workload.
Regarding prices, input costs fell at the slowest rate in 18 months—amid reports of lower raw material prices partially offsetting higher freight rates—moving prices closer to stabilization. The decline in average factory gate charges was the weakest since early 2023. Furthermore, July’s survey indicated a downward revision in manufacturers’ growth forecasts for the year ahead, which retreated to a three-month low and moved below the long-run average.
Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the outlook:
“A manufacturing recovery probably won’t happen before autumn. Due to the sharp drop in production and new orders, we’re revising our growth forecast down. With manufacturing being so crucial to Germany’s economy (accounting for 22.6% of gross value added), we are now expecting the overall economy to grow by just 0.2% this year, down from our previous forecast of 0.5%.”