Fading supply problems ease downturn in German manufacturing -PMI

BERLIN – Fading supply chain problems helped ease the downturn in Germany’s manufacturing sector in December, although weaker demand continues to weigh on sentiment, a survey showed on Monday.

S&P Global’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Germany’s economy, rose to 47.1 from November’s 46.2.

While it was the third month-on-month increase in a row, the index is still below the 50 mark, meaning activity continues to shrink, albeit at a slower pace.

A Reuters poll of analysts had pointed to a December reading of 47.4, in line with an earlier flash reading.

“The survey signalled better availability of materials, and with it an easing of the decline in production,” leading to some of the gloom around the sector lifting, said Phil Smith, Economics Associate Director at S&P Global Market Intelligence.

Price pressures also lifted somewhat with the improvement in material availability. The input prices index was at its lowest since November 2020, though above the pre-pandemic average.

“Still, rapidly falling new orders remains an issue for many manufacturers, particularly intermediate goods producers (i.e. makers of components for other businesses), with high stocks being just one of the factors weighing on demand,” said Smith.

New orders were in contraction territory for the ninth month in a row in December, due to stock levels as well as heightened levels of market uncertainty and a marked increase in prices.