Early Indicator On The Economic Trend

IHS MARKIT / BME GERMANY MANUFACTURING PMI®

n e tBMEnet GmbH

Reading Sample

12 Individual Indexes:• Purchasing and Sales

Prices

• Orders and PurchasingVolumes

• Material and FinishedGoods In Stock

© 2018 IHS Markit

45

50

55

60

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70

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Manufacturing PMIsa, >50 = improvement since previous month

Last six months

IHS MARKIT / BME GERMANY MANUFACTURING PMI®

KEY FINDINGS

GERMANY MANUFACTURING PMI

Growth of Germany's manufacturing sector slowed in September, subdued by the steepest drop in new export orders in over five years, the latest PMI® survey data from IHS Markit showed. Production levels exhibited their smallest gain since April 2016, while business confidence towards the year-ahead outlook for output was the gloomiest for over three years.

September saw the headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – sink to a 25-month low of 53.7 from 55.9 in August. The fall in the index reflected slower growth in output, new orders and employment, as well as a reduction in the incidence of supplier delivery delays. The only positive directional influence was from stocks of purchases, which showed a marginal rebound following a slight drop in August.

Inflows of new orders at German manufacturers rose only fractionally in September, with the latest increase being in the weakest in the current 46-month sequence of growth. The slowdown was largely due to a drop in new orders from abroad, which fell for the first time in over three years and to the greatest extent since June 2013. Broken down by main industrial groupings, the data showed that the decline in demand in September was largely centred on the capital goods sector (which includes machinery & equipment and transport), where there were falls in both total orders and exports sales following strong growth in August.

Growth in output levels remained quicker than

that of new orders but also eased during the month, down to the weakest in nearly two-and-a-half years. The rate of job creation across the manufacturing sector meanwhile decelerated to the slowest since February 2017, though it remained elevated by historical standards.

Owing to sustained strong growth in workforce numbers, combined with the near stagnation in new order inflows, manufacturers were able to reduce backlogs of work for the first time in over three-and-a-half years in September.

September's survey meanwhile indicated a softening of German goods producers' confidence in regards to future output. Although firms on balance still believed production would grow in the year ahead, the degree of optimism was at its lowest since May 2015 amid uncertainties surrounding the US-China trade war and Brexit negotiations.

Elsewhere, September data signalled a moderation in the rate of input cost inflation in the manufacturing sector for the fourth month in a row, down to its weakest for a year. That said, the latest rise in average purchase prices was steep overall, with panellists commenting on increases in the cost of energy, basic metals (particularly steel) and metal products. Goods producers raised output charges, accordingly, with the rate of inflation ticking down slightly since August but remaining strong.

Supply chains remained under pressure in September, though the latest increase in lead times was the least marked since March 2017.

Output, new orders and employment all rise at slower rates

Export sales fall for first time in more than three years

Gloomiest outlook for output since May 2015

Manufacturing PMI sinks to 25-month low as exports fall the most in over five years

Embargoed until 0955 CEST (0755 UTC) 1 October 2018

53.7SEP

AUG: 55.9

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

OUTPUT INDEX

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'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Output Indexsa, >50 = growth since previous month

45

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55

60

Last six months

NEW ORDERS INDEX

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'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

New Orders Indexsa, >50 = growth since previous month

45

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60

Last six months

NEW EXPORT ORDERS INDEX

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60

70

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

New Export Orders Indexsa, >50 = growth since previous month

45

50

55

60

Last six months

BACKLOGS OF WORK INDEX

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70

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Backlogs of Work Indexsa, >50 = growth since previous month

45

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55

60

Last six monthsThe slower rate of increase in new orders seen in September allowed manufacturers to make inroads into their backlogs of work during the month. It marked the first time in more than three-and-a-half years that a decrease in outstanding business has been recorded. The reduction was only modest overall, but it nevertheless represented a marked turnaround from the near-record growth in backlogs seen at the beginning of the year.

The level of new orders received by German goods producers from abroad decreased for the first time in over three years in September, ending one of the longest sequences of uninterrupted growth seen in the survey's two-decade-plus history. Although only modest, the extent to which export sales fell was the most marked since June 2013. Panellists commented on fewer orders from China, the US and Turkey, which they partly linked to client uncertainty and delayed decision making.

German manufacturers' inflows of new orders eased closer to stagnation at the end of the third quarter, rising only fractionally and at the slowest rate in the current 46-month sequence of expansion. Data inferred that sales to domestic clients remained in growth territory, with the main area of weakness being a decline in export orders.

September saw the seasonally adjusted Output Index slump to a 29-month low, signalling a further slowdown in the rate of growth in manufacturing production. Where an increase in output was recorded, this was mainly linked to sustained growth in new orders and attempts to clear outstanding backlogs of work.

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

STOCKS OF FINISHED GOODS INDEX

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'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Stocks of Finished Goods Indexsa, >50 = growth since previous month

45

50

55

Last six months

EMPLOYMENT INDEX

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65

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Employment Indexsa, >50 = growth since previous month

45

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60

Last six months

QUANTITY OF PURCHASES INDEX

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70

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Quantity of Purchases Indexsa, >50 = growth since previous month

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55

60

Last six months

SUPPLIERS' DELIVERY TIMES INDEX

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70

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Suppliers' Delivery Times Indexsa, >50 = faster times since previous month

25

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55

Last six months

September saw stocks of finished goods at German manufacturers return to contraction, following a fractional increase midway through the third quarter. A decrease in post-production inventories has now been recorded in eight of the past nine months, with the latest reduction partly the result of deliberate destocking efforts, according to the survey's anecdotal evidence.

Despite easing slightly in September to the weakest in a little over one-and-a-half years, the rate of job creation in the manufacturing sector remained elevated by historical standards (and much quicker than those recorded for output and new orders). Around 19% of businesses noted an increase in their staffing numbers, compared with only 5% that registered a decrease.

Faced with higher production requirements, German manufacturers scaled up their quantities of purchases during September, thereby sustaining a sequence of growth in buying levels seen since early-2015. However, in line with general theme seen throughout the latest survey data, the rate of expansion in purchasing activity lost momentum, easing to the weakest since May 2016.

Manufacturers reported that capacity constraints in supply chains had led to longer lead times on purchased items during September. That said, the number of firms reporting delivery delays was far lower than seen earlier in the year, with the extent of the deterioration in vendor performance in the latest survey period the least marked for 18 months.

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

STOCKS OF PURCHASES INDEX

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'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Stocks of Purchases Indexsa, >50 = growth since previous month

45

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55

Last six months

INPUT PRICES INDEX

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100

'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Input Prices Indexsa, >50 = inflation since previous month

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75

Last six months

OUTPUT PRICES INDEX

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'96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18

Output Prices Indexsa, >50 = inflation since previous month

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65

Last six months

FUTURE OUTPUT INDEX

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'12 '13 '14 '15 '16 '17 '18

Future Output Index>50 = growth expected over next 12 months

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Last six months

The seasonally adjusted Stocks of Purchases Index moved back above the 50.0 no-change mark in September, after having signalled a slight decline in pre-production inventories in August. An increase in stocks of purchases has now been recorded in 14 of the past 15 months, though the latest rise was only fractional overall.

Average purchase prices paid by German manufacturers increased again in September. The inputs most frequently reported as up in price included energy, capacitors, basic metals (particularly steel) and metal products. That said, latest data showed a further moderation in the overall rate of input price inflation, with the respective seasonally adjusted index falling to its lowest level for a year.

Rising costs in the manufacturing sector resulted in a further increase in factory gate charges in September as businesses looked to pass on some of the burden onto clients. The rate of output price inflation eased slightly since August, but it nevertheless remained much quicker than that seen on average over the series history (since late-2002).

Manufacturers became much less optimistic about the outlook for output over the next 12 months in September. Confidence was in fact at its lowest for almost four years as businesses highlighted growing uncertainty surrounding the US-China trade war and Brexit negotiations. In addition, there was a feeling among many firms that growth would naturally cool after the recent boom phase.

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

INTERNATIONAL PMI

sa, >50 = improvement since previous month

USA

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60

'15 '16 '17 '18

Eurozone / UK

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65

'15 '16 '17 '18

sa, >50 = improvement since previous monthManufacturing PMI

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'15 '16 '17 '1845

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65

'15 '16 '17 '18

Germany / France / Italy

Japan / China

Manufacturing PMI, Aug ‘18

EZ

54.6

RU

48.9

CN

50.6

JP

52.5IN

51.7

TR

46.4

AU

53.2

BR

51.1

MX

50.7

CA

56.8

US

54.7

GB

52.8

ASEAN

51.0

PMI OutputNew

Orders

New Export Orders

Backlogs of Work

Stocks of Finished

GoodsEmploy-

ment

Quantity of

Purchases

Suppliers' Delivery

TimesStocks of

PurchasesInput Prices

Output Prices

Future Output*

sa, 50 = no change over previous month. *50 = no change over next 12 months.

INDEX SUMMARY

04/18 58.1 57.4 55.8 55.9 57.4 49.4 56.9 56.1 29.5 50.5 68.2 60.3 60.6

05/18 56.9 55.7 55.2 52.4 54.9 49.0 56.5 55.3 33.1 50.6 71.7 58.3 55.5

06/18 55.9 55.2 52.5 52.2 53.7 47.0 57.9 53.0 35.1 50.3 73.2 57.2 54.3

07/18 56.9 56.7 53.8 52.9 53.6 48.3 57.2 54.6 33.6 52.3 71.5 57.4 57.9

08/18 55.9 56.6 52.7 51.8 52.1 50.2 57.6 55.9 37.0 49.7 69.8 58.3 57.0

09/18 53.7 53.2 50.4 48.1 48.8 48.3 56.2 52.7 40.2 50.3 66.6 58.1 52.6

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

Although new orders of intermediate goods rebounded slightly in September, production growth eased for the sixth time in 2018 so far to the weakest since May 2016. The rate of job creation in the sub-sector also slowed down from August's record high, though employment numbers still rose markedly overall. Intermediate goods manufacturers' optimism towards future output was at a near three-year low in September, with companies on balance expecting only a modest rise in production over the next 12 months.

The investment goods sub-sector saw a significant loss of momentum in September. Driven by the sharpest fall in exports sales for over five-and-a-half years, inflows of new orders at capital goods manufacturers fell into contraction for the first time since May 2015. This followed strong order book growth in August. Production and employment both increased at slower rates, while firms in the sub-sector were generally downbeat about the outlook, expecting production levels to slip slightly in the year ahead. Capital goods makers continued to face the worst input delivery delays of the three sub-sectors and raised buffer stocks of purchases, accordingly.

Makers of consumers goods recorded renewed increases in both output and new orders in September, following contractions in the previous month. Nevertheless, the respective quarterly growth rates were the lowest recorded for three years. Job creation among consumers goods manufacturers remained strong and picked up to the quickest for six months, in part reflecting a high degree of optimism towards the outlook for output over the next 12 months. Of the three sub-sectors, consumer goods producers faced the weakest rise input costs as well as the least substantial input delivery delays.

Manufacturing Sub-sector Index Summary, Sep '18

PMI Output New OrdersNew Export

OrdersBacklogs of

Work

Stocks of Finished

GoodsEmploy-

mentQuantity of Purchases

Suppliers' Delivery

TimesStocks of

PurchasesInput Prices

Output Prices

Future Output*

sa, 50 = no change over previous month. *50 = no change over next 12 months.

52.4 51.8 50.6 52.4 49.6 54.1 57.1 55.7 46.8 48.5 59.4 56.2 60.353.5 52.1 51.4 48.2 50.1 47.4 57.1 52.3 42.2 50.1 66.0 56.9 53.054.8 55.9 49.0 47.5 48.1 46.5 55.0 51.8 34.0 52.1 68.1 60.3 49.0

MANUFACTURING SUB-SECTORS

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PMIsa, >50 = improvement since previous month

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'15 '16 '17 '18

New Orders Indexsa, >50 = growth since previous month

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Suppliers' Delivery Times Indexsa, >50 = faster times since previous month

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'15 '16 '17 '18

Input Prices Indexsa, >50 = inflation since previous month

CONSUMER GOODS

INTERMEDIATE GOODS

INVESTMENT GOODS

ConsumerIntermediateInvestment

PMI

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60

CONSUMER GOODS

INTERMEDIATE GOODS

INVESTMENT GOODS

Last six months

IHS Markit / BME Germany Manufacturing PMI®

© 2018 IHS Markit

DisclaimerThe intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates.

About PMIPurchasing Managers’ Index® (PMI®) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

About IHS MarkitIHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2018 IHS Markit Ltd. All rights reserved.

BMEBME is the German Association for Materials Management, Purchasing and Logistics, founded in 1954. It provides services for around 9000 individual and corporate members, including small and medium-sized businesses as well as Germany’s top 200 companies. The BME promotes a dialogue between business and academia, both on the demand and the supply side, by providing the necessary networks for communication and knowledge exchange. The association is open to all company types from any sector (industry, trade, banking/insurance, public sector, service providers, etc.).

Bundesverband Materialwirtschaft, Einkauf und Logistik e.V. (BME), Frankfurter Str. 27, 65760 Eschborn

Frank Rösch E-Mail: frank.roesch@bme.de Internet: www.bme.de.

MethodologyThe IHS Markit / BME Germany Manufacturing PMI® is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

The headline figure is the Purchasing Managers’ Index® (PMI). The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.

Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

September 2018 data were collected 12-21 September 2018.

For further information on the PMI survey methodology, please contact economics@ihsmarkit.com.

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