Key facts
- Germany's manufacturing sector accelerated in August, with new orders driving the strongest production growth since January 2022.
- The S&P Global final Purchasing Managers' Index for German manufacturing rose to 54.3 in August from 52.2 in July.
- Demand drivers for German manufacturers included defense spending, data center build-outs, and stockpiling.
- Supplier delivery times in Germany lengthened, and purchasing activity grew rapidly as firms secured inputs.
- The outlook for German businesses regarding output in the year ahead improved significantly.
Germany's manufacturing sector experienced an acceleration in August, with a significant increase in new orders leading to the strongest production growth seen since January 2022, according to a survey by S&P Global. The final Purchasing Managers' Index (PMI) for German manufacturing rose to 54.3 in August, up from 52.2 in July and slightly exceeding the preliminary reading of 54.1.
The upturn was primarily driven by a solid rise in new orders for the third consecutive month. Firms reported demand stemming from defense spending, data center build-outs, and stockpiling activities. Supply chain pressures also intensified, with supplier delivery times lengthening to their greatest extent in three months. Purchasing activity grew at its fastest pace since May 2022 as companies sought to secure inputs amid tight availability.
Phil Smith, economics associate director at S&P Global Market Intelligence, noted that the upturn was led by the intermediate goods sector, suggesting that growth is partly supported by safety stockpiling amid supply constraints. The business sentiment regarding output for the year ahead improved noticeably, reaching its brightest level since the onset of the Middle East conflict. While employment continued to decline, the pace of job cuts eased for the third month, reaching its weakest point since September 2023. Backlogs of work also increased solidly, reversing a three-month trend of decline.