Germany's manufacturing PMI falls to 38-month low in July

By Tuba Ongun

ANKARA (AA) - German factory activity in July contracted the most in 38 months, with downturn in new orders gathering pace, according to the preliminary purchasing managers’ index (PMI) data released on Monday.

The Hamburg Commercial Bank (HCOB) Flash Germany Manufacturing PMI fell to 38.8 in July from 40.6 in June, a report by the US-based financial services company S&P Global revealed.

Demand in goods plunged due to customer hesitancy, destocking, high inflation and rising interest rates.

As a result, manufacturing production levels dropped for the third consecutive month in July and at the fastest rate since May 2020.

HCOB Flash Germany Manufacturing PMI Output Index plunged to a 38-month low of 41 in July from 43.6 in June.

A lack of incoming new work saw firms make further inroads into their backlogs of work during July, the report said.

Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, said manufacturers reduced their workforces for the first time since January 2021 due to the drop in activity and new orders.

"There is an increased probability that the economy will be in recession in the second half of the year. This is because our GDP nowcast for the third quarter, which considers these latest HCOB PMI figures, points to negative growth," Rubia added.