Germany July final manufacturing PMI 43.2 vs. 42.6 prelim

• Final Manufacturing PMI 43.2 vs. 42.6 expected and 43.5 prior.

Key findings:

• HCOB Germany Manufacturing PMI at 43.2 (Jun: 43.5). 3-month low.
• HCOB Germany Manufacturing PMI Output Index at 42.5 (Jun: 45.1). 5-month low.
• Decline in input prices eases amid pressure from shipping costs.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Germany’s industry is off to a rough start in the second half of the year. Manufacturing production dropped further in July,
showing no signs of slowing down. At the same time, companies are ramping up their staff cuts, clearly having little hope for
improvement. A look at the order intake backs up their concerns. Orders fell at the fastest rate in three months, continuing a
persistent decline since spring 2022. It’s no wonder confidence in this sector has taken a hit. A manufacturing recovery
probably won’t happen before autumn.”

“Due to the sharp drop in production and new orders, we’re revising our growth forecast down. With manufacturing being so
crucial to Germany’s economy (accounting for 22.6% of gross value added), we are now expecting the overall economy to
grow by just 0.2% this year, down from our previous forecast of 0.5%.”

“The old playbook is not working anymore. Back in the day, German companies could count on a boost whenever emerging
markets were on the up. But these days, while industries in those countries are growing — as shown by the PMI data —
German firms are not reaping much benefit. Instead, the drop in export orders keeps on going. Meanwhile, Chinese
companies are seeing a rise in their foreign orders. This backs up the idea that competition from China is heating up.”

“The reduction in inventories of materials continues unabated. While the initial impression was that many companies had
stocked up on too many goods in order to protect themselves from new supply disruptions, the reduction in inventories now
has more to do with the fact that companies see no reason to prepare for increased demand for the time being. In addition,
high interest rates mean that stockpiling is tying up capital, which is no longer as cheaply available as it was a few years
ago.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.