The German manufacturing sector remains in contraction, but at least cost and supply pressures were seen easing last month. Output and new orders both continue to fall amid flagging demand and expectations remain rather pessimistic. S&P Global notes that:
“Although the immediate threat of gas shortages may have subsided somewhat, contributing to an improvement in expectations from October’s low point, energy security remains a major concern for German manufacturers, as does falling demand.
“New orders have plunged rapidly in recent months, leading to a build-up of inventories and becoming the main drag on output for many manufacturers in place of material shortages.
“Pressure on supply chains has been steadily easing thanks in part to the scaling back of purchasing activity among manufacturers. The improvement in supply conditions was underscored by the survey’s delivery times index registering above the 50.0 no-change threshold for the first time in almost two-and-a-half years in November.
“With the easing of supply-chain bottlenecks comes a softening of inflationary pressures in the goods-producing sector. The rate of increase in manufacturing input costs slowed sharply for a second straight month in November to leave it at its lowest for almost two years. This bodes well for headline inflation as easing pipeline price pressures start to filter through.”