• Final Manufacturing PMI 42.4 vs. 42.1 expected and 43.2 prior.

Key findings:

  • HCOB Germany Manufacturing PMI at 42.4 (Jul: 43.2). 5-month low.
  • HCOB Germany Manufacturing PMI Output Index at 42.8 (Jul: 42.5). 2-month high.
  • New orders drop at quickest rate for nine months.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The recession in Germany’s manufacturing sector is dragging on way longer than anyone expected. August saw an even
steeper drop in incoming orders, killing off any hope for a quick bounce back. The HCOB PMI shows that the downturn has
been going on since mid-2022, which is unusually long. Normally, over the last 30 years, the industry has managed to
recover within a maximum of 20 months of a recession starting.

But this time, things are different, and China seems to be
the main culprit. The country is stepping up its game, competing head-to-head with German industrial companies – not just
in China, but also in Germany and in other key markets, especially in the automotive and mechanical engineering sectors.
Just as Germany was on the verge of reaping the benefits of a tentative global manufacturing uptick, as hinted by the global
PMI, the economic cycle seems to have taken another nosedive.

In August, export orders in Germany dropped at a much
faster pace than in previous months. This suggests that the export slump we’ve been seeing in recent months is probably
going to stick around for a while.
Order backlogs for German companies have been shrinking since the middle of 2022, as shown by the HCOB PMI data.
While Eurostat data echoes this trend, it doesn’t quite capture the full picture. What often gets missed is that companies can
be struggling despite having order books filled to the brim.

This happens when the prices agreed upon for those orders no
longer cover rising production costs. In the worst-case scenario, these companies may face bankruptcy, but until that point,
the stock of orders data can misleadingly inflate the health of business conditions.
The recession is still hitting the consumer goods sector, and it is also dragging down the intermediate and capital goods
industries.

The downturn has become more pronounced in the intermediate goods sector, while the reduction in production
in the capital goods sector has slowed slightly compared to the previous two months. However, with new orders declining
again, and at a slightly faster pace, there’s little hope that the capital goods sector will see any expansion in the coming
months.”

Germany Manufacturing PMI