- Prior 42.6
Even with a strong contraction in manufacturing conditions, this is still a 8-month high reading for Germany - which speaks more to how bad things got at some point last year. But at least now, new orders are seen declining at its slowest rate since April and price pressures are also softening further. However, there is still much uncertainty that is persisting on the outlook. HCOB notes that:
“The situation in Germany's manufacturing industry can be likened to a hiker who has involuntarily descended into a valley. Progress is evident in the search for an exit, yet uncertainty lingers about the proximity of finding the right path. Thus, while it is encouraging that the PMI index has increased for five months in a row, it continues to signal a rather fast decline of demand for manufactured goods.
"Over the past few months, manufacturers have become more aggressive in reducing employment, especially in the segment of intermediate goods. This adjustment is likely a response to a trend where the backlog of orders for a significant number of companies has decreased to a level where maintaining all employees on the payroll is no longer viable. Therefore, the pathway to a reversal in employment trends hinges on a more favorable order situation.
"In the realm of sectors, there is a silver lining in the investment goods segment. The decline in new orders has notably eased, with the corresponding index approaching the pivotal 50 threshold. Employment reduction in this sector has almost come to a standstill, and the dip in output is relatively minor. This contrasts with the intermediate goods sector, where output, new orders and employment are all experiencing a swifter decline.
"Manufacturers have been consistently lowering their prices for seven consecutive months. One could think that this development puts pressure on profits. However, this is most probably not the case, because there has been a significant relief on the cost side. To be more precise, input prices began their descent eleven months ago and have experienced a much more substantial drop than output prices. Furthermore, in December, companies reduced output prices only minimally. Overall, even though output has taken a severe hit, it appears that profits have managed to weather the storm."
