Growth in German manufacturing points to rebound

Factories may contribute to fourth quarter surge, PMI data shows

Photograph: Bloomberg

Photograph: Bloomberg

 

German manufacturing growth slowed slightly in November, but solid demand from domestic and foreign customers kept it robust overall, a survey showed on Thursday, suggesting that factories will contribute to a rebound in the fourth quarter.

Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Europe’s largest economy, fell to 54.3 from 55.0 in October, which was the highest level in nearly three years.

The November reading was a tick below a flash reading of 54.4 points, but comfortably above the 50 line that separates growth from contraction.

IHS Markit economist Oliver Kolodseike said the average reading over the fourth quarter so far was the best since the beginning of 2014, suggesting manufacturing should make a positive contribution to growth at the end of the year.

New order intakes rose a bit less sharply than in the previous two months. Still, the overall growth pace was robust, with panellists pointing to increased demand from both the domestic and foreign markets such as China and Russia.

Sector data showed producers of consumer and intermediate goods recorded solid growth. Manufacturers of investment goods reported weaker expansions.

Factories also continued to hire new staff as they tried to raise capacity. Although the rate of job creation slowed, it remained among the strongest seen in the past five years.

“Moreover, with backlogs rising sharply and companies ramping up their purchasing activity, it is likely that the positive trend in the sector continues into the new year,” Mr Kolodseike said.

German economic growth slowed over the summer as exports weakened, with growth in gross domestic product halving to 0.2 per cent on the quarter in the three months through September. The economy is expected to rebound in the fourth quarter.

For 2016 as a whole, the government expects domestic demand to propel growth of 1.8 per cent, the highest in five years. For 2017, Berlin predicts a slowdown to 1.4 per cent because of weaker exports and fewer working days.

Reuters