- Final Manufacturing PMI 43.0 vs. 42.6 expected and 40.6 prior.
Key findings:
- HCOB Germany Manufacturing PMI at 43.0 (Sep: 40.6). 3-month high.
- HCOB Germany Manufacturing PMI Output Index at 42.8 (Sep: 41.3). 2-month high.
- Deeper cuts to output prices signalled amid strong competition.
Comment:
Commenting on the PMI data, Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said:
"The mood in German industry remained glum in October. However, there are signs that an economic trough may have been reached. Although the headline PMI remained deep in recessionary territory in October, it showed a slight improvement from a very low level. However, caution is required when interpreting the values, as this is just a one-month improvement after all.
The coming months may shed light on a sustainable trend reversal. There is a glimmer of hope in the order situation. Although new work is still shrinking, the rate of contraction has slowed considerably, indicating a possible stabilisation in the coming months. All sub-sectors are stuck in a downturn. In the consumer goods sector, the performance of companies continued to deteriorate in October. Yet the declines in production and orders were not as severe as in previous months.
Things are looking even worse in the capital goods and intermediate goods sectors. Of particular concern is that the issue of job cuts is becoming an increasingly acute one, not only at Volkswagen, where three plant closures and extensive layoffs are up for discussion, but across the entire labour market. The monetary policy environment could be a small ray of hope for the manufacturing industry. The ECB cut interest rates again in October and is planning a further reduction in December.
The Fed opted for a reduction of 50 basis points in September. HCOB Economics expects one further interest rate cut in the eurozone and two in the US in 2024. These measures could ease financing pressure and support demand in the export-oriented German industrial sector. However, as long as structural problems persist in Germany, the outlook remains bleak. This is because companies continue to contend with the lack of certainty for investment, high energy costs as well as strong competition and weak demand from China."
