German flash manufacturing PMI drops to 53.7 in Sept, 25-month lows

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German business activity continued to slow down its pace of expansion in the month of September, the latest manufacturing activity report from IHS/Markit research showed.

German manufacturing purchasing managers index (PMI) dropped sharply in September, coming in at 53.7 while services PMI jumped to 8-month highs of 56.5 versus 55 last.

The IHS Markit Flash Germany Composite Output Index reversed to hit two-month lows at 55.3 in September, from August’s 55.6.

Key comments from Phil Smith, Principal Economist at IHS Markit:

“The service sector was left to do most of the heavy lifting in September, as manufacturing put in its worst overall performance since August 2016. Service providers enjoyed the biggest boost to new business in over seven years in a further sign of strong domestic demand. Manufacturing new orders, however, were broadly flat as export sales declined for the first time in more than three years.”

“Manufacturers’ confidence took a big hit in September, deteriorating to its lowest for almost four years. Goods producers foresee output barely rising over the next 12 months and have cited growing uncertainty towards the outlook.”

“The September flash data meanwhile showed another solid gain in private sector employment, the one area where manufacturing and services both made strong positive contributions during the month. Falling backlogs of work in the manufacturing sector suggests that capacity may have finally caught up with demand, so there’s a good chance the pace of factory job creation will lose momentum in coming months.”  

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