Germany’s Manufacturing Sector Decline

BERLIN (Reuters) – Germany’s manufacturing sector ended 2024 on a downbeat note, with sharper declines in output and new orders, indicating that industry in Europe’s largest economy will not recover soon, a survey showed on Thursday.

The HCOB Germany Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 42.5 in December from 43.0 in both October and November, confirming a preliminary flash estimate.

Readings above 50.0 indicate growth, while those below point to contraction.

“The situation in the manufacturing sector is still pretty grim,” said Cyrus de la Rubia, chief economist of Hamburg Commercial Bank.

“Production is on a steep decline, and new orders keep slumping, making it clear that the industry won’t be coming out of recession anytime soon,” he stated.

The intermediate goods category experienced its steepest decline in a year, and “things are not looking much better for the investment goods sector,” added de la Rubia.

Employment in the manufacturing sector decreased for the 18th consecutive month as firms adjusted to weaker demand; however, the job loss rate slowed to its weakest since August.

Despite improvements in input delivery times and a continued decrease in input prices, manufacturers’ growth expectations remain muted due to political uncertainty and challenges in the construction and automotive sectors, according to the survey.

The trend of deteriorating business conditions may end in the second half of 2025, de la Rubia noted, anticipating a new government in place after February elections, potentially changing the caution towards investment and consumption.

“But finding support for this thesis in the numbers is difficult. The index for future production is barely above 50, suggesting that companies expect to produce only slightly more in a year than they do today,” he added.