Unhappy New Year for German manufacturing, PMI data shows

Germany's manufacturing confidence was dented at the end of 2024, according to the latest Purchasing Managers Index (PMI) figures.

The current PMI rating stands at 42.5 for December, compared to 43 for October and November. Ratings above 50.0 indicate economic growth.

The disappointing figure is leading analysts to hold off on predicting anything other than the cycle of stagnation and recession that Germany has been unable to evade since the global COVID pandemic.

The numbers released on Thursday by Hamburg Commercial Bank (HCOB) show a drop-off in output and new orders. This was particularly stark regarding the intermediate goods category, which includes components manufactured in Germany and exported to supply chains around the world.

HCOB chief economist Cyrus de la Rubia told Reuters that confidence in intermediate goods had seen its steepest decline in a year and painted a bleak picture. "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 said.

Unemployment figures in Germany are at 6.1 percent of the workforce, almost double the 3.1 percent figure from 2019, before the global pandemic. In the manufacturing sector, the number of jobs available fell for the 18th consecutive month as companies adjusted to the decline in demand, with the automotive industry and construction the worst hit.

Analysts hope the downward spiral will be corrected by the second half of 2025 as the political instability brought about by the federal election called for February 23 ends with the formation of a new government.

German manufacturing has suffered because it no longer has access to cheap Russian gas, which has fuelled industries such as steel-making. 

While Berlin has invested heavily in renewable energy projects, primarily wind and solar, Germany has not found an affordable source of power that can power homes and industries when the sun doesn't shine or the wind doesn't blow. Alternatives, including deals for liquified natural gas (LNG) from the United States and Qatar, have been at considerably higher prices than the gas supplied by Russia.

European manufacturing, including that in Germany, is also concerned about the impending return of Donald Trump to the White House. Trump has spoken at length about wanting to impose tariffs on goods coming into the U.S. Estimates by the German Economic Institute say that Trump's return could reduce Germany's GDP by 1.5 percent over four years.