- Prior 39.6
The headline reading is an improvement to September but is still a very poor one as weak demand conditions are weighing heavily on Germany’s manufacturing sector. Of note, job cuts are also picking up and that will be something to be mindful about in the months ahead if overall conditions do not recover significantly. HCOB notes that:
“The trajectory of Germany’s economy resembles a plane preparing for touchdown: decelerating its descent before landing
at the bottom. Indeed, manufacturing output was still falling in October, but slower than over the last few months. This is also
true for the forward-looking indicator of new orders. Considering the PMI figures in our nowcast model, it seems clear that
manufacturing is still in a downturn for the current year. Yet, signs are pointing towards a potential rebound by the first half of
next year. In line with this, there’s a modest deceleration in the rate at which companies trim their purchases.
“Employment cutbacks ramped up in October. Yet, when comparing to previous recessions, the current job scenario seems
relatively favourable given the overall situation in the manufacturing sector. We see this as the result of the structural labour
shortage, meaning that most companies are holding onto the people they have got. Given the recent improvement of the
headline PMI, we question if companies would increase the pace of job cuts in the coming months.
“Across the board, we are seeing the slump ease up a bit, including consumer goods, intermediates, and investment goods.
But, the investment goods sector is still taking a hard hit as new orders are down sharply again. Demand in this capital and
debt intensive sector apparently is reacting more than others to higher interest rates.
“Prices of manufactured goods are still on a downhill slide. That is mostly the case for intermediate goods, but for finished
goods to a lesser degree. Price cuts, which have been underway since June 2023, have slowed down over the last few
months. However, should oil prices, which spiked due to the war in the Middle East, remain at higher levels for a longer
period, companies could bump up what they charge, again.”