A slightly lower revision marks a further drop in German manufacturing activity in February but similar to France, this is offset by a strong surge in the services sector on the month. There was a marginal growth recorded in output but this was more than offset by a further decline in new orders. S&P Global notes that:
"Latest PMI data showed a welcome uptick in production levels across the German manufacturing sector in February, the first in nine months, amid a substantial easing of supply-chain bottlenecks. However, thanks in large part to a sustained slump in new orders, the headline PMI remained firmly in sub-50 contraction territory, and even moved to a three-month low due to a fall in the stocks of purchases subcomponent and strong downward pressure from the supplier delivery times index (which is inverted in the calculation of the PMI, meaning any improvement in delivery times pulls the headline index lower).
"With businesses having scaled back their purchasing activity in line with falling demand, this has reduced pressure on supply chains and led to improved delivery times, which has in turn reduced the need for excess safety stocks and thereby compounded the downturn in demand for inputs. As a result, we're seeing particular weakness in demand at makers of intermediate goods, who went against the trend in February and recorded a further reduction in output.
"The easing of supply chain pressures is not only underscored by a record improvement in delivery times, but also by a first drop in purchase prices for nearly two-and-a-half years, as the pendulum of pricing power swings back in the direction of buyers. Hopes for lower inflationary pressures helped brighten the outlook among German goods producers in February, although expectations are yet to return to the level prior to Russia's invasion of Ukraine."
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