Germany's manufacturing PMI rises to over 2-year high

By Tuba Ongun

Germany's manufacturing sector continued to face deteriorating business conditions in February, but the pace of decline slowed to its weakest in over two years, according to a report by the US-based financial services company S&P Global on Monday.

The Germany manufacturing purchasing managers’ index (PMI) rose to 46.5 in February, up from 45.0 in January, marking the highest reading since January 2023.

While still below the 50.0 threshold indicating growth, the improvement signals a gradual stabilization in the sector.

The uptick in the PMI was largely led by a slower decline in new orders, which recorded their smallest drop in nearly three years. This was partly due to a reduced drag from falling export sales, which declined only modestly during the month at one of the slowest rates since the downturn began in early 2022.

Manufacturing production also saw a slower rate of contraction, with output experiencing its softest fall since May last year. The easing declines in both production and new orders reflect improving conditions midway through the first quarter.

While output and new orders showed signs of stabilization, employment remained a weak spot. Job cuts accelerated sharply compared to January, highlighting ongoing challenges in the labor market.

Meanwhile, input costs and output prices fell at a slightly faster rate in February as vendors offered discounts, driven by spare capacity across supply chains.

Despite these mixed signals, manufacturers in Europe’s largest economy remain cautiously optimistic about the future. They anticipate output levels to rise over the coming year, though their confidence has dipped compared to January, said S&P Global.