Supply delays threaten German manufacturing prospects: PMI

Increasing supply delays threaten to slow Germany’s manufacturing sector, which remained in growth territory in January despite a hard lockdown to quell a second wave of the coronavirus, a survey showed on Monday.

IHS Markit’s Final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the economy, fell to 57.1, higher than a flash reading of 57.0 but lower than December’s 58.3 mark.

Factories in Europe’s biggest economy have been humming along during the pandemic on higher demand from abroad, giving the economy much needed impetus as the services sector stalls.

Phil Smith, principle economist at IHS Markit, said the immediate impact of supply bottlenecks were rising costs.

“The survey gives some cause for concern regarding the growing incidence of supply delays,” said Smith. “Increasing demand for inputs from manufacturers, combined with shortages of materials and shipping containers has created a perfect storm for supply chains, with January’s survey indicating a record increase in lead times.”

He added: “Whilst any impact on actual production levels seems to have been only limited so far, with output keeping pace with new orders, we are seeing declining levels of inventories at manufacturers, and therefore a growing risk of disruption.”