The downturn in Germany's manufacturing sector softened in January, with goods producers reporting the slowest declines in both output and new orders for eight months, according to the latest Hamburg Commercial Bank (HCOB) purchasing managers’ index (PMI) survey.

Expectations towards the outlook improved, but businesses continued to cut workforce numbers as efforts were made to trim surplus capacity.

Weak demand conditions once again weighed on manufacturers' pricing power as the year began. Discounting was the least prevalent for five months as input costs continued to trend towards stabilisation.

The headline HCOB Germany manufacturing PMI read 45 in January, up from 42.5 in December and the highest since May last year. Slower falls in both output and new orders were the main factors behind this rise.

The rate of contraction in production eased noticeably from December and was the weakest for eight months.

Downturns softened in all three of the main industrial groupings covered by the survey. It was a similar story for new orders, which likewise posted the least marked fall since last May.

The latest decrease in volumes of incoming new work was still sizeable, as surveyed firms alluded to a range of headwinds to demand such as investment reticence, competition from abroad and general weakness across domestic and international markets.

Export sales were down again, albeit falling at the slowest rate for eight months.

January saw another round of job cuts across Germany's manufacturing sector, to extend the current period of staff retrenchment to 19 months, a elease from S&P Global said.

Although easing slightly to the weakest since August last year, the pace at which employment fell was still marked and quicker than the average over the current sequence.

Workforce numbers were scaled back amid signs of spare capacity, with businesses completing orders more quickly than they were being received.

The rate of depletion in backlogged orders did, however, ease sharply since December and was the weakest for almost two-and-a-half years.

Meanwhile, business expectations rose to the highest for nearly three years.

On the supply side, January data showed that weak demand for inputs led to modestly faster delivery times and imparted downward pressure on purchase prices.

Manufacturers cut their purchasing activity again in January, citing lower output requirements and associated efforts to run down inventory. The rate of decline in buying levels eased sharply to the weakest since September 2022.

Fibre2Fashion News Desk (DS)