PMI Signals Resurgent Growth for 2011
November data signalled resurgent growth in the German manufacturing sector, with output and new orders both rising at faster rates than in the previous month. This contributed to a strong pace of job creation, which accelerated to its sharpest since the survey-record high posted in March 2008. Meanwhile, input cost inflation picked up to a six-month high in November, reflecting rising costs for a range of raw materials, but this was partially offset by increased factory gate charges.
Improved business conditions were highlighted by a rise in the seasonally adjusted Markit/BME Germany Purchasing Managers’ Index (PMI) from 56.6 in October to 58.1 in November, its highest level for three months. The headline PMI – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – has now posted above the 50.0 no-change mark for 14 consecutive months, with the latest reading much higher than the survey average (52.0).
The increase in the headline PMI reflected stronger positive contributions from the output, new orders and employment components in November. Production levels rose at the fastest pace for three months, driven by sharp growth in the investment and intermediate goods sectors.
German manufacturers indicated the fastest rise in new orders for four months in November. Although the rate of expansion remained strong, it was slower than the average for the first half of 2010. In line with the trend for output, investment and intermediate goods producers posted the fastest gains in new work. Increased levels of new business were supported by a solid improvement in demand from abroad, but the rate of export order growth eased slightly on the month.
Jobs growth was recorded for the eighth month running in November, reflecting greater production requirements and efforts to expand operating capacity in the manufacturing sector. All three market groups posted an increase in workforce numbers, with intermediate goods producers reporting the fastest growth. Measured overall, manufacturing job creation was the sharpest for over two-and-a-half years.
Increased production requirements also contributed to a robust rise in purchasing activity in November, extending the current period of growth to 14 months. Strong demand for raw materials placed pressure on suppliers in the latest survey period, as highlighted by another steep deterioration in vendor performance.
Attempts to mitigate against supplier delays resulted in a further accumulation of pre-production inventories in November. The current eight-month period of input stock building is the longest since that seen during 1997-1998. Some firms also commented that higher pre-production inventories reflected efforts to protect against accelerating input price inflation.
Average cost burdens rose at the sharpest pace since May, mainly driven by increased copper, steel and energy prices. This led to another solid rise in factory gate charges in November, extending the current period of output price inflation to 10 months.
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