German manufacturing activity weakened slightly in December and the quarterly average for the final three months of 2007 fell to the lowest in more than two years, a survey showed today.
The NTC/BME Purchasing Managers' Index (PMI), based on a survey of around 400 firms, slipped to a seasonally-adjusted 53.6 last month, from 53.7 in November. Analysts had predicted the index would fall more heavily to 53.2.
The average PMI reading of 53.0 for the fourth quarter was the lowest since 49.8 in the third quarter of 2005. However, the index held above the 50 level that separates growth from contraction for a 28th month, extending the longest period of growth in the survey's history.
NTC economist Rob Dobson noted that production growth had improved further in December after October's marked slowdown. A gauge of output rose to 54.7 in December from 54.3 the previous month, the survey showed.
"It is still too early to confirm that the recovery will be sustained in the near term, as the weak trend in new orders remains a concern and output growth could still falter if this fails to improve early in 2008," Dobson said.
The latest manufacturing PMI showed orders increased for the second successive month in December, although the rate of expansion was only slight with NTC's measure of new business dropping to 50.9 from 52.7.
"Some clients were unwilling to commit to non-essential expenditure as a result of ongoing uncertainty in credit markets," NTC said.
Growth in export orders quickened slightly, but the average rate of expansion over the fourth quarter was the weakest since the third quarter of 2003, it added. NTC attributed the slowdown to the euro's strength against the U.S. dollar, which it said had impacted on sales to American clients. Dobson noted, however, that the trend in manufacturing sector employment remained robust. Although weakening from November's four-month high, the rate of input price inflation remained elevated and well above the survey average in December, the survey showed. Companies reported higher prices paid for metals, paper and plastics and part of the rise in costs was passed on to clients via higher charges, with output price inflation accelerating to a five-month high.