According to a poll released on Friday, a steep drop in new orders weighed on German industrial output in June, clouding the outlook for Europe’s largest economy.
The final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for around one-fifth of Germany’s GDP, decreased to 52.0 in June from 54.8 in May, in line with analysts’ predictions and a flash estimate.
An index of new orders dipped in at 43.3, down from 47.0 in May to the lowest level since May 2020 and lower below the 50-point threshold that distinguishes expansion from contraction.
‘We’re witnessing a quick correction in underlying demand for German goods,’ Phil Smith, economics associate director at S&P Global Market Intelligence, said, adding that companies reported ‘several challenges to export sales.’
‘With backlogs now in decline, firms’ expectations for output over the next 12 months have dropped to the lowest in almost two years,’ he said.
The poll found modest relief in inflation, with rates of increase in both input costs and output prices dropping for the second month in a row.
‘However, it’s difficult to separate any relief from supply pressure from the effects of decreased demand,’ Smith noted.
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