Germany's manufacturing sector posted a final Purchasing Managers' Index (PMI) reading of 51.4 for April, slightly above the preliminary estimate of 51.2, though down from the prior reading of 52.2.
Key findings:
Output and new orders continued to rise in April, though at a slower pace than before
Business expectations turned negative for the first time in 18 months
Cost pressures and supply delays reached their worst levels since 2022
Phil Smith, Economics Associate Director at S&P Global Market Intelligence, offered the following assessment:
"The growth we're seeing in the manufacturing sector appears to be on borrowed time, given the underlying factors driving it and the further sharp drop in business expectations into negative territory."
"Output and new orders continue to be supported by the rush to secure supplies amid concerns over future price increases and shortages, with this frontloading of activity having the potential to lead to some payback in the coming months."
Smith noted that while new orders from makers of intermediate goods — those used to produce other goods — remain strong, demand for consumer products has already seen a marked decline.
"Reflecting growing concerns about both demand and supply-side conditions, businesses expecting activity to fall in the coming year now outweigh those anticipating a rise. There are worries that surging inflation pressures and the associated squeeze on purchasing power will stifle demand, with factory gate price inflation jumping sharply to its highest in over three years in April."
"At the same time, with supply delays already at a level not seen since mid-2022, there is a risk that production could be scaled back regardless of the demand situation," Smith added.
Why it matters
Business expectations turned negative for the first time in 18 months, signaling that manufacturers themselves anticipate a slowdown in activity over the coming year.
Factory gate price inflation jumped to its highest level in over three years in April, raising concerns that rising costs could squeeze purchasing power and weaken consumer demand.
Supply delays have reached their worst level since mid-2022, meaning production could be curtailed by logistics constraints regardless of the state of order books.
