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German manufacturing sector’s growth slows down in October on decreased new orders

The manufacturing sector’s growth in Germany slowed in October to its weakest in almost two-and-a-half years, owing to decrease in new orders placed with German manufacturers. The headline IHS Markit Germany Manufacturing PMI dropped for the third straight month in October, from 53.7 in September to 52.2, a 29-month low.

The index stayed above the 50.0 no-change mark, owing partially to rises in output and employment, though growth decelerated on both fronts. The rise in production in October was just marginal and the softest since November 2014. Output was underpinned slightly by clearing backlogs of work, the level of which dropped for the second consecutive month. It marked the first time that back-to-back declines have been seen since 2013.

Inflows of new work dropped into contraction in October, following continuous sequential rise since December 2014. The fall was mainly seen in the intermediate and capital goods sub-sectors. Supporting the reduction of total inflows of new business was a second consecutive drop in export sales.

Manufacturers faced the sharpest fall in new business from abroad for more than five years, citing increased hesitancy among international clients. Manufacturers’ purchasing levels dropped accordingly, ending a sequence of growth in purchasing activity stretching back to early-2015. Supplier delivery times continued to deteriorate, though the fall in demand for inputs aided in relieving some pressure and the fall in performance was the least marked since February last year.

Employment was one of the areas where the manufacturing sector continued to record growth. The latest rise in workforce figures was again strong by historical standards, with all three main industrial groupings adding to the rise. However, the rate of job creation eased further from solid rates recorded early in the year to the slowest since February 2017.

Meanwhile, latest data indicated an intensification of cost pressures as input price inflation recovered from a 12-month low in September. Manufacturers underlined rises in the cost of electronics, energy, oil derivatives and steel. However, output prices showed the smallest rise since July last year.

Meanwhile, manufacturers’ expectations for output in the year ahead turned negative, reflecting worries over a slowing economy, issues throughout the car industry and geopolitical frictions.

At 11:00 GMT the FxWirePro's Hourly Strength Index of Euro was bullish at 73.8523, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -106.131. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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