The slowdown in Germany’s manufacturing sector, which accounts for about a fifth of Europe’s largest economy, took another setback in June as both output and new orders fell at a faster pace, a survey showed Monday.
The final HCOB purchasing managers’ index (PMI) for German manufacturing fell to 43.5 in June from 45.4 in May, confirming a preliminary flash estimate and remaining below the 50 level that separates growth from contraction.
“The accelerated fall in new orders and especially export orders indicates that we will have to wait a few more months before we see a recovery in the manufacturing sector,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank .
A likely explanation for the weakness in export orders is increased competition from China, which is increasing its exports worldwide due to weak domestic demand, he added.
“This situation creates a double problem for German exporters,” de la Rubia said, noting that companies were facing a reduction in their exports to China at the same time as increased competition from Chinese products, in particularly in emerging markets.
The destocking cycle shows no signs of slowing down, with companies reporting an increasing decline in pre-production and post-production inventories.
However, businesses are more optimistic about the future than they were in May, with sentiment at its highest level since February 2022.
Anecdotal evidence has highlighted hopes for a recovery in exports, increased investment and a general improvement in economic conditions over the next 12 months.
On the price front, weak demand continued to put downward pressure on input costs and manufacturing costs. However, the respective decline rates decreased slightly, according to the survey. (Reporting by Maria Martinez, editing by Christina Fincher)
