- Prior 42.5
Despite a slight revision higher to the initial reading, it is still a five-month low. Weak demand conditions is still the main problem and we’re starting to see employment conditions also take a slight hit. The good news at least is that price pressures are easing a touch amid the softness in demand. HCOB notes that:
“Germany’s manufacturing sector has been mired in recession since around the middle of last year, and the latest PMI
readings signal another contraction in the first quarter of 2024. To make things worse, the downturn is very broadly based,
encompassing capital goods as well as intermediate and consumer goods.
“The PMI figures are a good forecaster for the production figures of Destatis. Interestingly, the value-added figures – a
methodologically different indicator to the production figures also published by Destatis – present a less dire picture.
Comparing data from the start of 2022, production has seen a nearly 7% decline through the end of 2023, which is
consistent with PMI data. In contrast, value added has only dipped by 0.6% over the same period. This suggests that the
widely discussed trend of deindustrialization in Germany may not be as pronounced as production data indicate. Indeed, the
share of manufacturing value added as a portion of the total economy remains at 22.3%, surpassing the 33-year average of
22.0%.
“The PMIs are sending mixed signals with respect to the inventory cycle. The index for the stock of finished goods has
continued its recovery and indicates for the first time in 12 months a rise, even if it is marginal. However, stock of purchases
fell in March at one of the fastest rates since 2009. Thus, it seems that Germany is not yet part of the turn in the inventory
cycle we saw globally in February, which is surprising, given the high degree of openness of the German economy.
“The crucial forward-looking new orders index has shown a slight uptick recently. However, there is no discernible reversal in
the downward trend of orders that has persisted since the spring of 2022. This pattern holds true for backlog of works as
well. Despite a near two-year decline in backlogs, order books remain far from empty, as highlighted by the range of stock of
orders data provided by Destatis. It’s worth noting that those figures represent the average stock of order books,
encompassing significant outliers such as the aerospace sector with a range of 42 months, alongside industries like
chemical products, which exhibit a much narrower range of only 1.6 months.”