German manufacturing sector shows signs of stabilisation in May 2024

The HCOB Germany manufacturing PMI rose for the second month running in May, climbing from April's 42.5 to 45.4. Although still firmly below the 50 no-change threshold, the latest reading was the second highest in the past 15 months.

The main positive directional influence came from new orders, which posted a much slower decline than in April and one that was the weakest overall for two years. A near-stabilisation in exports sales was a key factor, as firms highlighted improved demand from both China and the US, as per S&P Global.

The rate of contraction in production likewise eased considerably midway through the second quarter. Output fell at only a modest pace that was the softest recorded since the current sequence of decline began in May 2023. Makers of intermediate goods even recorded a solid rise in production.

Backlogs of work continued falling sharply during May, despite the rate of depletion easing to the weakest for 20 months. As such, another round of job cuts was seen across the manufacturing sector, extending the current sequence of decline in employment to nearly a year. The rate of staff shedding remained quicker than the average over this period and was little changed from that recorded in April.

Although manufacturers continued to show a willingness to reduce workforce numbers, they registered greater optimism towards growth prospects in the year ahead. Expectations improved for the third month running and were the highest since February 2022, supported by hopes of lower interest rates leading to a pick-up in investment and economic activity in general.

On the inventory front, May's survey showed steep and accelerated reductions in stocks of both finished goods and inputs. In the case of the latter, the rate of depletion was one of the fastest seen since 2009. Firms often reported efforts to streamline inventories and reduced purchases of inputs accordingly. The rate of decline in buying levels was the weakest since September 2022, but it was much faster than the concurrent fall in output.

Competition among suppliers resulted in further downward pressure on average prices paid for purchases in May. The rate of decline even quickened for the first time in six months (although it was still the second slowest since February 2023). Supplier delivery times meanwhile quickened again, albeit with the improvement being the least marked for three months.

Efforts to secure new business also led manufacturers to reduce average factory gate charges in May, the twelfth month in a row in which this has been the case. The rate of decline was a solid and little-changed from that recorded in April.

Fibre2Fashion News Desk (DP)