Growth of German business activity slowed in July as the country’s manufacturers recorded their worst monthly performance in seven years, according to the latest flash PMI data from IHS Markit.
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The IHS Markit Flash Germany Composite Output Index fell to 51.4 in July.
This was down from 52.6 in June and its joint-lowest reading in over six years.
Job creation meanwhile slowed to its weakest since April 2015 as firms reported an accelerated rate of reduction in backlogs and lower confidence towards future output.
Manufacturing output fell sharply in July, registering its steepest drop since March and one of the most marked contractions since 2009.
With new orders, employment and stocks of purchases also falling more quickly, the headline IHS Markit Flash Germany Manufacturing PMI registered a sevenyear low of 43.1, down from 45.0 in June.
However, latest data continued to show resilience in the service sector, which saw a further marked increase in business activity during the month, supported by firm domestic demand.
After rising in June, overall inflows of new business returned to contraction at the start of the third quarter, falling for the fifth time in the past seven months.
The main drag was from manufacturing order books, which fell at the fastest rate since April amid reports of lower export sales (in particular to China) and weakness in the automotive sector.
July’s decrease in factory export orders was in fact the sharpest seen in over a decade.
With services firms also reporting reduced inflows of new orders from abroad, total new export business was down for an eleventh straight month in July.
The lack of incoming new work was reflected in a further decrease in outstanding business across Germany’s private sector.
Backlogs fell in manufacturing at the fastest rate since June 2009 and barely rose across the service sector, resulting in the quickest overall decline in more than six years.
The pace of job creation across Germany slowed sharply in July, showing the weakest rise in overall employment since April 2015.
There was variation at the sector level, however, with a further marked rise in service sector payroll numbers contrasting with a sharp and accelerated reduction in manufacturing jobs – the steepest seen for seven years.
Confidence among manufacturers towards future output sank sharply in July, down to its lowest since late-2012 due in part to increased concerns towards the outlook for the car industry.
Service providers meanwhile expressed their weakest optimism since December 2014, meaning that overall business confidence was at its lowest in more than four-anda-half years.
On the cost front, latest data showed input price inflation easing to a near three-year low, weighed down by a steep and accelerated reduction in prices paid by manufacturers for raw materials and parts.
Cost pressures in the service sector meanwhile remained elevated.
Average output prices also rose more slowly in July, with the rate of inflation the weakest seen since November 2016.
While charges levied by service providers increased a solid rate that was unchanged since June, manufacturers reported the first drop in factory gate prices in almost three years amid reports of strong competition. ■