German manufacturing sector suffered new setback at end of Q2

By Sahika Olgun

ISTANBUL (AA) – The German manufacturers suffered a decline in the Purchasing Manager's Index (PMI), down to 43.5 in June from 45.4 in May, S&P Global said on Monday.

However, manufacturers' perspectives on the future were slightly more optimistic, while export sales fell faster than total new orders in June, but at a slower rate, it noted.

Companies interpreted the weakness in domestic demand as well as the absence of new business from other European markets and China.

At the same time, competition among suppliers continued to exert downward pressure on purchasing prices, recording the longest streak of declines, it says.

More broadly, the June survey signaled a fourth consecutive monthly improvement in manufacturers' expectations for growth.

Anecdotal evidence highlighted hopes for a revival in exports, an increase in investment, and a general improvement in economic conditions over the next 12 months, it noted.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said in S&P's report: "I think this downturn in production will eventually end, but it looks like it will take longer than expected."

Although the global manufacturing sector is posting a moderate recovery, German firms’ weak export orders are worrying, he said, adding that one possible explanation for this is increased competition from China, which is raising its exports worldwide due to stagnant domestic demand.

“We are now operating in a structurally different world compared to the 2010s. Companies must adapt to these new realities rather than hoping to return to the 'good old days',” he added.