BERLIN (Reuters) -The downturn in German manufacturing activity eased further in July as output grew for a fifth straight month, albeit at a significantly slower pace, a survey showed on Friday. The
Germany's Manufacturing Sector Shows Signs of Recovery in July
Overview of Manufacturing Trends in Germany
BERLIN (Reuters) -The downturn in German manufacturing activity eased further in July as output grew for a fifth straight month, albeit at a significantly slower pace, a survey showed on Friday.
The HCOB final Purchasing Managers' Index (PMI) for German manufacturing, compiled by S&P Global, rose to 49.1 in July from 49.0 in June, slightly below a preliminary reading of 49.2.
That marks the highest reading in nearly three years, though it still remains slightly below the 50 level denoting growth.
Current Manufacturing Activity
Employment, stocks of purchases and supplier delivery times made positive contributions to the overall indicator, which helped to offset the slower rises in output and new orders.
Impact of Domestic and Foreign Demand
Output rose for a fifth month in a row, although at the weakest pace since the current growth sequence began in March, mainly due to declines in consumer and intermediate goods.
However, Hamburg Commercial Bank economist Cyrus de la Rubia noted that production in capital goods has grown robustly.
"This suggests that domestic demand, which depends on private consumption, is somewhat weakening, while foreign demand - crucial for the capital goods industry - is performing better," said de la Rubia.
Future Outlook and Challenges
Export sales increased for the fourth month in a row in July, but growth moderated from June's 40-month high.
"While this was initially linked to front-loaded U.S. imports in the spring, the continued foreign demand into early summer suggests a more fundamental improvement in conditions."
The tariff agreement reached by the United States and European Union on Sunday may mean that U.S. importers will buy fewer goods from Germany in the near future, said the economist.
"At the same time, however, uncertainty is likely to settle at a lower level, which should support overall demand," he said.
(Reporting by Miranda Murray; Editing by Toby Chopra)
