German factories fire on all cylinders in May, but France slips

German factories fired on all cylinders in May with output growing at the strongest pace in more than six years, a survey showed on Thursday, suggesting manufacturing will boost overall growth in Europe’s biggest economy in the second quarter.

Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, jumped to 59.5 from 58.2 in April.

That was the highest level since April 2011 and put the index well above the 50 line that separates growth from contraction for the 30th consecutive month. The final figure came in slightly better than an earlier flash reading of 59.4.

Output, new orders and employment all improved at the fastest rates in around six years. Growth in new export business reached its highest level in seven years.

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Manufacturers taking part in the survey pointed to strong demand from Asian customers, IHS Markit said, and domestic demand for industrial goods also remained solid.

Meanwhile, French manufacturing growth slipped in May from a six-year high reached in April as the flow of new orders slowed.

IHS Markit said its final PMI fell to 53.8 from 55.1 in April, which was the strongest reading since April 2011.

Fifty-point line

The May result was slightly lower than a preliminary reading of 54.0 but remained comfortably above the 50-point line.

After years of decline due to lost competitiveness, French manufacturers have seen business improve markedly over the last eight months as the domestic and global economies have picked up speed.

In Greece, manufacturing activity shrank in May for the ninth month in a row, but the pace of decline in new business and production slowed from April, leading companies to add jobs for the first time in six months.

Markit’s PMI for manufacturing, which accounts for about 10 per cent of the economy, rose to 49.6 from 48.2 in April. Readings below 50 denote contractions in activity.

The rate of decline in new orders, including from abroad, was the lowest seen so far this year, leading manufacturers to slightly reduce output.

Faced with lower production requirements, companies cut purchasing activity for the fifth time in as many months in May but increased staffing numbers fractionally.

Cost burdens

Strong competitive pressures forced manufacturers to lower their factory gate prices as cost burdens grew, squeezing profit margins.

Separately, Spanish manufacturing grew at its fastest pace since January, boosted by strong output and new orders, and job creation surged at its fastest pace in 19 years.

PMI of manufacturing companies stood at 55.4 in May, up from 54.5 in April. The index has been above 50 for every month since November 2013.

Factory job creation was especially strong, with the index rising to 56.2, the highest since May 1998, from 55.6 a month earlier.

Dutch manufacturing also continued to expand, led by new orders, output and exports, but slipped from a month earlier.

The seasonally-adjusted headline NEVI PMI stood at 57.6, in May, just off April’s 57.8. The rate of expansion was the lowest in four months, but still among the highest recorded in the past six years.

-Agencies