German manufacturing PMI eases to 53.9 in September

Germany's manufacturing sector maintained solid expansion in September despite slight moderation. The S&P Global manufacturing Purchasing Managers' Index (PMI) dropped to 53.9 in September from 54.3 in August, holding comfortably above the 50-point mark that divides growth from contraction.

Manufacturing output recorded another sharp increase during the month, following the strongest advance in more than four years seen in August. New orders rose for the fourth consecutive month, led by investment goods producers. Foreign orders expanded across Asia, Europe, and the United States, alongside domestic gains.

Production expectations for the next 12 months reached their highest level since February and the second-highest print in over four and a half years, supported by artificial intelligence demand. Order backlogs increased at the fastest pace since April 2022, which slowed job cuts to their softest rate in three years. Meanwhile, raw material purchasing expanded, and inventories neared stabilization.

Cost pressures re-accelerated, with input cost inflation reaching its highest level since June due to energy prices, electronics, transport, and raw materials. Factory gate inflation reached a three-month high as companies passed on expenses. Phil Smith, of S&P Global Market Intelligence, stated that the data reinforces German economic resilience against higher energy costs and long-term interest rates, although persistent cost pressures still challenge broader employment expansion.