Little change to the initial estimate as German manufacturing slumps into contraction territory for the first time in over two years with a renewed downturn in new orders being observed. Firms are growing more pessimistic about the outlook as persistently high inflation and economic uncertainty continues to weigh on sentiment. S&P Global notes that:
"The fall in the headline Manufacturing PMI into contraction territory in July doesn't come as a surprise, with underlying data having flashed warning signals for several months now. The survey's measure of new orders has been in sub-50 contraction territory since April, and worryingly it continues to trend downwards as demand for goods recedes further from the highs seen last year, strained by the uncertain economic outlook and the high inflation environment.
"Although some components remain in short supply, another sharp rise in overall stocks of inputs held by manufacturers in July suggests that surpluses might be building up in other areas, and indeed we've now started to see manufacturers paring back their purchasing activity for the first time in two years.
"A fall in overall demand for inputs contributed to a further softening of inflationary pressures across the manufacturing sector, although even with this slowdown price increases remained high by historical standards.
"The potential for a shortage in gas supplies has German manufacturers seriously worried about the outlook for production in the coming year. Goods producers' expectations turned negative back in March, and have deteriorated in almost every month since then as downside risks to the sector's outlook continue to build."
