As expected (by me anyway), the Markit/BME Germany Manufacturing PMI® shows Germany is back in contraction.
Weaker new order intakes lead to deteriorating manufacturing business conditions in March.
- Output growth slows to only marginal pace
- Sharpest fall in new work for three months
- Cost inflation highest since July 2011
The seasonally adjusted Markit/BME Germany Purchasing Managers’ Index®
(PMI®) dipped back below the neutral 50.0 mark in March, thereby ending
two months of marginal improvement. At 48.4, down from 50.2 in February,
the index pointed to a moderate deterioration in overall operating
conditions, and was the lowest since December 2011. Moreover, March’s
PMI reading was six index points lower than the average for 2011 (54.8).
The output and new orders components of the headline index have both
moderated substantially since their highs at the beginning of last year.
By sector, investment goods producers have seen the biggest slowdown
compared with the rates of growth registered in early 2011.
March data pointed to a marked reduction in new export orders, extending
the current period of decline to nine months. Survey respondents mainly
cited softer global trade flows, with weaker trends in exports to China
and across the euro area largely offsetting a recent upturn in demand
from the USA.
A marked drop in purchasing activity at manufacturers contributed to
reduced supply chain pressure and the fastest improvement in vendor
performance since July 2009. Average cost burdens nonetheless continued
to rise at a robust pace in March, with the rate of inflation reaching
its highest in eight months.
Given the complete collapse in
the periphery, German manufacturing will eventually plunge hard. It is
illogical to expect Germany can hold up Europe by itself, especially
with a simultaneous slowdown in China. For details, please see China Manufacturing PMI™ Decreases at Second-Fastest Rate in Three Years
US manufacturing appears to be chugging along nicely, at least on a
relative basis, but the warmest weather in history and robust car sales
led the way. Don't expect that to last. Headwinds are enormous.
Mike "Mish" Shedlock