- Prior 40.6
This just reaffirms the ugly preliminary estimate as German manufacturing slumped heavily as we enter into Q3. The headline reading is the lowest since May 2020 as a deepening decline in output and new orders was observed. HCOB notes that:
"These are ugly figures. The fall in demand for German manufactured goods, as measured by the survey’s new orders index, is one of the most pronounced over roughly the last 30 years. We’re also seeing substantial cuts to both stocks of purchases and output. This is evidence of the destocking cycle being in full swing, which is typical in times of recession. Having said this, it also lays the ground for a rebound next year should firms start to rebuild stocks again.
“The risks for the German economy as a whole running into trouble during the second half of the year have clearly increased.
“The robustness of the labour market is somewhat put into question by the latest PMI figures as the manufacturing employment index fell close to but below 50 for the first time since 2021. The weakness is led by the intermediate goods sector, where the pace of job cutting has increased to the quickest for almost three years.
“Deflation is here, at least in the area of goods. Input costs fell at the fastest rate since the global financial crisis and the same was true for output prices. Energy prices play a crucial role in this respect, as German natural gas prices have fallen like a stone over the last few months. They are standing currently at roughly 80% below the year before.
“Delivery times are speeding up again. The improvement in input lead times is so astonishing, that one can conclude normality in supply chains is approaching fast, but is not there yet."