• Prior 43.1

This marks a setback for Germany's manufacturing sector, as the reading is a four-month low. Both output and new orders saw their downturns intensify on the month, with employment conditions also starting to be pressured further. It just reaffirms that Europe's largest economy is still the sick man of the bloc for now. HCOB notes that:

“All hope has been dashed – for the moment. After a steady increase of the PMI over the last half a year, the index plunged to its lowest point since last October. The drop was the result of a broad-based deterioration of indicators like the accelerated fall in new orders, the faster downturn in output and the more aggressive trimming of jobs. The widespread nature of the downturn offers little hope for a turnaround in the near future.

“The worsening situation in the German manufacturing sector is kind of unique in the Eurozone this month. Looking around, French and Italian companies are much less depressed and in Spain the sector is even growing again. This result will most probably heat up the discussion about de-industrialisation, political errors and the need for reforms in Germany. However, better to have trading partners whose industry is showing some robustness instead of being dragged down by them further into the abyss. We would even go so far as to say that the other economies are leading the way which would mean that Germany might be close to bottoming out.

“It's like Germany’s manufacturers are operating in a bubble, unaffected by the detours that commercials vessels are taking to avoid attacks from the Houthi Rebels in the Red Sea. While the shortening of delivery times softened a bit in January, firms reported in February much faster deliveries again. This is good news by itself – who would not be happy to get their ordered goods quick and fast. However, it is a clear sign that manufacturers are facing lower demand. To conclude the matter, some firms are certainly reporting problems with Houthi-induced delays, but the overall impact seems to be negligible.

“The worst news emanates from the investment goods sector. This area, which is at the core of the German manufacturing sector, was the main driver of the steep reaccelerated fall of manufacturing output in February. The decision of investment goods companies to cut jobs at the fastest pace since October 2020 underscores the pessimism among managers regarding the prospects of a near-term recovery."