All five components of the PMI made stronger positive contributions to the headline figure in February. The index has posted above the neutral 50.0 mark in each month since October 2009 and the latest reading signalled a further acceleration from the eight-month low registered last September. February data pointed to a steep upturn in manufacturing production levels, extending the current period of expansion to twenty months. The rate of growth picked up to the fastest since April 2010 and was the second-strongest in the survey history. All three market groups recorded an acceleration of output growth, with investment goods producers continuing to register the fastest pace of expansion.

Stronger output growth reflected another surge in new business intakes during February as improving global economic conditions resulted in increased client demand. The pace of new business expansion accelerated for the fourth time in the past five months and was the steepest since July 2010. This was supported by another robust rise in new orders received from abroad. Increased intakes of new export work were seen in all three market groups, with companies in the investment goods sector continuing to outperform consumer and intermediate goods producers.

Higher production requirements and efforts to raise operating capacity resulted in another steep rise in workforce numbers. The pace of manufacturing sector job creation reached a survey record high for the third month running in February, with employment growth particularly strong in the intermediate and investment goods sectors. Measured overall, staffing levels have now increased for eleven successive months. Manufacturers in Germany reported a rapid rise in average cost burdens, with the rate of inflation accelerating sharply to the steepest in almost fifteen years of data collection. This in turn resulted in the most marked increase in factory gate charges since January 2007.

Anecdotal evidence pointed to increased costs for a wide range of raw materials, including chemicals, industrial metals and plastics. Survey respondents frequently cited the impact of increased global demand for commodities and an associated squeeze on the availability of inputs from suppliers.

Delivery times for raw materials lengthened sharply in February, with vendor performance deteriorating at the fastest pace since July 2010. Purchasing activity meanwhile rose at the quickest rate for ten months as manufacturers sought to raise output levels and increase their stocks of inputs. Highlighting attempts by some firms to build safety stocks, latest data showed a rise in pre-production inventories for the eleventh month running.

The Markit/BME Purchasing Managers’ Index (PMI) is a composite indicator designed to provide an overall view of activity in the manufacturing sector and acts as a leading indicator for the whole economy. The indicator is derived from individual diffusion indices which measure changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased. A reading of the PMI below 50.0 indicates that the manufacturing economy is generally declining; above 50.0, that it is generally expanding. A reading of 50.0 signals no change. The greater the divergence from 50.0, the greater the rate of change signalled by the index. Purchasing Managers’ Index and PMI are registered trademarks owned by the Markit Group.

According to the Federal Statistical Office (Destatis), the foreign trade balance showed a surplus of EUR 14.1 billion in June 2010, compared to a surplus of EUR 12.3 billion reported in June 2009.

Upon calendar and seasonal adjustments, exports increased by 3.8% and imports by 1.9% on May 2010, and the foreign trade balance recorded a surplus of EUR 12.3 billion in June 2010.

According to provisional results of Deutsche Bundesbank, the balance of current accounts showed a surplus of EUR 12.9 billion in June 2010, including the balance of services (– EUR 1.1 billion), factor income (+ EUR 3.3 billion), current transfers (– EUR 2.5 billion) and supplementary trade items (– EUR 0.9 billion). In June 2009, the German current account surplus was EUR 12.8 billion.

Germany dispatched in June 2010 commodities to the value of EUR 52.6 billion to the Member States of the European Union (EU) while receiving commodities to the value of EUR 45.9 billion from them. Compared with June 2009, dispatches to the EU countries increased by 23.5% and arrivals by 26.1%. Commodities to the value of EUR 35.7 billion (+22.0%) were dispatched to the euro area countries in June 2010, with the value of the commodities received from such countries being EUR 32.5 billion (+25.4%). In June 2010, commodities to the value of EUR 16.9 billion (+26.6%) were sent to those EU countries which do not form part of the euro zone, with the value of incoming commodities from such countries amounting to EUR 13.4 billion (+27.8%).

Exports of commodities to countries outside the European Union (third countries) reached EUR 33.8 billion in June 2010, and imports from those countries totalled EUR 26.4 billion. Against June 2009, exports to third countries grew 37.3% and imports from these 42.8%.

More details which are classified into countries and months are listed on: Destatis – exports and imports

Only recently were buyers shocked about rising steel and energy costs, whereas now expectations of a recession as well as the financial crisis and a rich harvest of agricultural commodities have led to sinking commodity prices. But things are not the way they look, according to Inverto AG. “The current price movement is no reason to lean back. And certainly not in an increasingly difficult economic environment,” the Cologne consulting company warns. Inverto supports its customers in strategic purchasing decisions and supply management.

They think that a perfect timing of decision-making and contract term are the crucial factors in procurement. Both can be identified by observing commodity markets systematically.

According to Inverto, the long-term rally in commodities is not over yet and will keep companies busy in the next few years. Due to their profound knowledge of markets and projects, experts are expecting a considerable change in margins for the average prices in 2009 compared with 2008: e.g. for steel, margins from a 15% decrease to a 5% increase, which are caused, among other things, by a continued drop in scrap metal and iron ore prices; and for synthetic granules, from an 11% decrease to a 5% increase. Due to the good wheat harvest in 2008, prices have fallen by more than 20% so far.

Markus Bergauer, member of the management board at Inverto AG, says: ”It is a fact that prices of industrial and agricultural commodities have a direct impact on corporate earnings. According to the purchasing consultants’ experience, companies are often insufficiently prepared for widely fluctuating procurement costs. “Purchasing commodities is like surfing. Now the time is right for building a powerful raw material management,” Frank Wierlemann, member of the management board at Inverto, says. For him, a perfect timing is essential when determining both, purchasing date and contract term. Companies should put themselves in a good negotiating position for the next year.

Inverto advises against favouring one single solution such as hedging or global sourcing, as levers of strategic price management for commodities vary, depending on industry and company. “The packaging industry with its high share of commodity prices, often more than a third of total costs, disposes of all relevant information regarding commodity markets,” Sebastian Mayer maintains, head of the Inverto Excellence Center Industrial Commodities. Subsequently however, companies often do not systematically implement those steps giving them room for manoeuvre. An automotive supplier, whose share of raw materials makes up just under 50% in terms of purchasing volume, has been able to cut raw material costs by around 7% by adjusting some of the levers. With 66% of its overall purchasing volume, a food company had an even higher share of raw materials. Raw material cost management has lowered its purchasing prices by 4%, with a huge impact on total costs.