German manufacturing activity expands in October as exports lift orders

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German manufacturing expands in October

Highlights

Germany Manufacturing PMI rises to 54.2 in October from 53.9 in September, indicating sustained expansion despite easing growth in output and new orders.
Overseas demand delivers export sales growth at the second-strongest pace in over four-and-a-half years, driven by Asia, North America, and parts of Europe.
Input price inflation surges to a five-month high and supplier delivery delays worsen since May, pushing manufacturers to raise inventory for the first time in nearly four years.

October PMI signals sustained factory growth

As reported by Reuters, the Germany Manufacturing Purchasing Managers' Index, compiled by S&P Global, rises to 54.2 in October from 53.9 in September, staying above the 50 threshold that separates growth from contraction.

Phil Smith, economics associate director at S&P Global Market Intelligence, says the recovery in German manufacturing remains on track in October despite a resurgence in cost pressures, highlighting resilience across the sector.

Output increases for a 10th consecutive month, although the pace eases to its weakest level since July. Growth in new orders also slows to a three-month low, while export sales continue to rise at a solid and slightly faster pace.

Overseas demand is the second-strongest in more than four-and-a-half years, behind only August's recent peak, with firms citing stronger sales from Asia, North America and parts of Europe.

Costs rise as sentiment weakens

Backlogs of work increase for a third straight month, with the pace unchanged from September and still tied for the fastest since April 2022. Employment declines only marginally, marking the smallest fall since August 2023.

At the same time, input price inflation climbs to a five-month high and supplier delivery delays worsen to the greatest extent since May. Output price inflation eases to an eight-month low as competitive pressure limits manufacturers' ability to pass through higher costs.

German manufacturers remain optimistic about output over the coming year, but confidence slips to its lowest level since July as rising costs weigh on sentiment. Firms also increase stocks of purchases for the first time in almost four years amid longer lead times.

In our earlier article on the DAX index’s bullish price action, we noted the benchmark holding above key moving averages as buying interest strengthened and momentum remained firmly positive. That piece also outlined the key support and resistance zones traders were watching, while flagging that some indicators were already in overbought territory despite the constructive trend.

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