German Manufacturing Sector Faces Continued Challenges

In December, the German manufacturing sector experienced a further contraction in activity, as indicated by a recent report from S&P Global and Hamburg Commercial Bank (HCOB). The HCOB Germany Manufacturing Purchasing Managers Index (PMI) recorded a decline to 42.5, down from 43 in the previous month, aligning with initial estimates.

Expert Insights on the Sector's Outlook

"The current state of the manufacturing sector remains dire, with production plummeting and new orders continuing to fall. This trend suggests that the industry is unlikely to emerge from recession in the near future," commented HCOB Chief Economist Cyrus de la Rubia. He further noted that the ongoing reduction in the order backlog since June 2022 indicates a challenging start to the new year.

Supply Side Improvements Amidst Muted Growth Expectations

The report also highlighted that while growth expectations among goods producers remain subdued, there has been some improvement in input lead times on the supply side, offering a glimmer of hope amidst the prevailing gloom.