At 56.0 in August, down from 56.8 in July, the seasonally adjusted NTC/BME Purchasing Managers’ Index (PMI) for
August data signaled that the strength of overall expansion continued to ease from the highs recorded in 2006, with the average PMI reading during 2007 so far (57.0) lower than for 2006 as a whole (58.1). Nevertheless, the PMI has now been above the critical 50.0 no-change mark for two years, primarily supported by continued growth of output and new business during this period.
August data pointed to a further easing of new order growth, partly reflecting weaker improvements in demand from abroad. Although the latest expansion of new business volumes was the weakest for three months, it was comfortably above the long-run survey average.
Job creation has been recorded throughout the past 23 months, which is the longest period of continuous staff recruitment in the survey history. Employment growth remained solid in August, as firms again sought to raise their output levels.
Latest data indicated a further marked increase in German manufacturing production and the rate of growth eased only slightly since the previous month. Some companies noted that increased levels of production, as well as the moderation of new business growth, had eased the pace of backlog accumulation at their plants.
Average input cost inflation eased markedly in August and was the slowest for 17 months, and output charge inflation was also the weakest since March 2006. A number of companies noted that a moderation of some commodity prices (particularly metals) had led to less marked rises in their overall cost burdens. Increased oil and energy prices were the main factors driving input costs higher.
Commenting on the German Manufacturing PMI survey data, Tim Moore, economist at NTC Economics said: “August data marked two years of continuous output growth in the German manufacturing sector and the pace of expansion remained strong by the survey’s historical standards, albeit below the average for 2007 to date. The gradual downtrend in new business growth persisted in August, which fed through to slower job creation and led to the lowest German manufacturing PMI for a year-and-a-half. Nevertheless, the PMI is comfortably in positive territory and suggestive that expansion of the real economy has initially been resilient in the face of volatility in global financial markets. Input cost inflation eased to its lowest for 17 months, a trend followed by factory gates prices in August, which will be welcome news to the ECB ahead of September’s interest rates decision.”
