Germany January final manufacturing PMI 45.5 vs 45.4 prelim

<ul><li>Prior 43.3</li></ul><p>The downturn in Germany's manufacturing sector eases in January but the overall outlook remains cautious for now. Output, new orders, and purchasing activity all fell at the slowest rates for several months but weak demand conditions are still prevailing. HCOB notes that:</p><p>“It could have been worse. Although the German manufacturing sector remains entrenched in recessionary territory in
January, the pace of the downturn is unmistakably slowing. This marks a continuation of a trend that has persisted for six
consecutive months. Such a trajectory suggests that growth might make a comeback within the next few months.
</p><p>"Surprisingly, companies in Germany appear to be weathering problems in the Red Sea quite well, according to the supplier
delivery times index. While the index has dipped noticeably, it remains above 50, suggesting that, on average, delivery times
have not yet stretched. This is remarkable as, courtesy of the ongoing Houthi attacks at Bab el-Mandeb strait, most
commercial vessels are opting for the longer route around South Africa, tacking on at least an additional seven days to their
voyages. The resilience of German companies may be attributed to an improved supply chain management, namely through
strategic diversification of suppliers. The five-day strike at the German railway company in late January, encompassing
freight trains, however, poses a new obstacle to the industry.
</p><p>"Demand is still in the doldrums, as new orders have been contracting for 22 consecutive months. This kind of prolonged
decline has not been seen since the PMI series kicked off in 1996. However, amidst this challenging scenario, there is a
silver lining. The new orders subindex has marked its fifth consecutive monthly increase. This upward trend extends across
consumer, intermediate, and investment goods. Historically, such rallies have culminated in a scenario of burgeoning new
orders, as witnessed in 2009 and a decade earlier in 1999.
</p><p>"Companies are taking advantage of the deflationary environment. Indeed, input prices continue to fall much faster than
output prices do, which should help firms to prop up their margins. This is nothing unusual as prices charged are usually
adjusted at a much slower pace than the input prices like raw materials which are a given on the world market. Whereas
when inflation starts to pick up like it did in 2022, output prices increase much slower than input prices, putting pressure on
profits."</p>

This article was written by Justin Low at www.forexlive.com.