Germany’s manufacturing PMI dips to 48.3 in May, remains in contraction

By Mucahithan Avcioglu

ISTANBUL (AA) - Germany’s manufacturing sector continued to contract in May, with the HCOB Manufacturing Purchasing Managers’ Index (PMI) slipping to 48.3, the lowest level in two months, S&P Global reported Monday.

The index fell slightly from April’s 32-month high of 48.4 and came in below market expectations of 48.8. A reading below 50.0 signals contraction in the sector, while figures above that level indicate expansion.

Despite the headline figure remaining in negative territory, production volumes increased for the third consecutive month. However, S&P Global noted that the pace of growth had slowed from April’s 37-month high, making it the weakest in the current growth streak.

Export demand was a bright spot, with sales to Europe and the US rising in May, partly driven by stockpiling ahead of potential tariff hikes. Still, overall new orders dipped slightly after two months of growth, weighed down by soft domestic demand.

German manufacturers continued to cut jobs, as a decline in backlogs of work pointed to reduced pressure on operating capacity.

Input costs fell significantly again in May, although the pace of decline eased compared to April’s 13-month record drop in purchase prices.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, acknowledged the modest decline in the PMI but urged a broader view of the data. “Most people have got so used to gloomy headlines from the industrial sector that the good news often slips under the radar,” he said.

He pointed to positive drivers including improved export activity, anticipated interest rate cuts, lower energy prices, and a cyclical rebound after more than two years of downturn.

“There is a decent chance this momentum will carry on, even if things slow down a bit,” de la Rubia added.