A slightly better revision doesn't take away from the fact that German manufacturing is seen softening as supply disruptions and weaker demand weigh on output. Adding to that, surging costs also led to a sharp rise in factory gate charges as manufacturers notably sought to protect their margins.
One of the standout details is that output prices increased at a rate which was by far the quickest in the series history, even surpassing the previous peak in November last year. That's not a welcome development on the inflation front at least. Ouch. S&P Global notes that:
"Germany's manufacturers are facing an unwanted combination of soaring price pressures and falling activity, as the war in Ukraine and COVID lockdowns in China disrupt supply chains and hit demand.
"The survey's output index is now in contraction territory for the first time since the initial COVID shutdowns in the first half of 2020, with a similar situation for new orders hinting that this not just a supply problem but also evidence of slowing demand for goods.
"While factory employment continues to rise, and at a robust pace, it would seem that it's only a matter of time before the weakened trends in output and new orders start to feed through to hiring activity, especially given manufacturers' gloomy assessment of the outlook.
"It's early days yet, but it's already looking like manufacturing will be a drag on the economy in the second quarter, and the prospect of more lockdowns in China and any escalation of the energy crisis would only serve to increase this risk."
