German industry: Fewer supply bottlenecks cause production to rise slightly in February

With supply chains running smoothly, German manufacturing output expanded slightly in February for the first time in nine months. This was reported by the US financial services provider S&P Global. The continuing slump in demand and the renewed weakness in new orders caused the seasonally adjusted S&P Global/BME Purchasing Managers' Index (EMI) to fall from 47.3 in the previous month to 46.3 points in February. The German PMI thus fell to its lowest level in three months.

"When will the EMI return to its winning ways? Because in February it once again fell short," emphasised BME Managing Director Dr Helena Melnikov in Eschborn on Monday. Despite a slight increase in production, the German PMI has been well below the 50-point growth threshold for eight months. "On the positive side, bottlenecks in supply chains are easing, purchasing prices have fallen again for the first time and the business outlook at companies is improving. On the negative side, new orders have shrunk again," Ms Melnikov concluded.

"The Corona crisis was caused by a supply shock: supply chain problems and plant closures led to excess demand and therefore to price increases," Dr. Gertrud R. Traud, chief economist at Helaba Landesbank Hessen-Thüringen, commented on the latest EMI data on Monday in response to a BME query. Supply is now building up again, but demand is weakening due to high inflation rates. "These will gradually decline in the course of the year, however, because there is now a supply overhang. Until then, growth will remain subdued. However, Germany will already leave the recession behind in the second quarter," the Helaba bank director added in her statement for the BME.

"The survey results are compatible with the economic diagnosis of a mild winter recession," Dr Ulrich Kater, chief economist at DekaBank, told BME on Monday.

"Although the pessimistic mood of the economy has brightened somewhat, optimism remains very limited. Industry is still treading water. Although there are signs of an easing on the supply side on the part of supply chains that are running better again, orders are falling in view of the weak global economy and the still-filled inventories. Uncertainty remains high," DIHK economic expert Dr Jupp Zenzen told BME on Monday.

Dennis Rheinsberg, Director - Energy & Industrials at IKB Deutsche Industriebank AG, gave the following assessment of the latest development of the EMI sub-index for purchasing prices to the BME on Monday: "The low level of incoming orders and increased destocking by companies are currently key drivers of purchasing prices. The weak demand is also reflected in the sideways movement of commodity prices; only individual industrial metals and steel products saw notable increases in February. Energy prices also support the trend in purchasing prices: Due to good LNG availability and high storage levels, gas prices are significantly below the previous year's level at around 50 euros per MWh, but continue to weigh on German industry in the face of international competition."

Source and Photo: BME