German Manufacturing Pushes Higher, UK Continues Slowdown

According to the Royal Bank of Scotland’s Purchasing Managers Index, the German manufacturing index reached a six-month high at 59.4, while the UK dipped to 51.9.

For December, the German manufacturing index was at a six-month high of 59.4, according to the Royal Bank of Scotland’s (RBS) Purchasing Managers Index (PMI). For 2006, the average PMI level of 58.1 was the highest in the history of the survey.

The output index was 61.3, up from November’s 59.1 due to an increase in new orders. Output prices also rose to 56.1 from 53.9, its second-highest level since data began being collected in September 2002.

The employment index dipped slightly to 53.6 from November’s 53.8. Jobs were added to handle the volume of current sales and outstanding business.

Shortages of raw materials like steel brought the input prices index to 63.7. Despite being at an eight-month low, it is still above the survey average of 56.3.

“December’s PMI data indicate that the German manufacturing sector has ended an already strong 2006 on a positive note. The headline PMI and indexes for output and new orders all rose to six-month peaks and, for 2006 as a whole, posted their highest annual averages in the survey history,” noted RBS Country Head Germany, Achim Klüber. “The PMI is broadly consistent with 6.0 to 6.5 percent growth of manufacturing production for the year as a whole.”

In the UK, the December PMI was 51.9, down from 52.5 in November.

The employment index was 49.0, showing a decrease in employment levels for the second straight month.

An increase in new orders helped boost manufacturing production. The output index for December was 52.1 and the new orders index was 53.1.

Higher prices for metals, timber, plastic and commodities led to higher input prices for manufacturers and despite an eight-month low in December, the rate of inflation in average factory gate prices brought the output price index to 53.5, above the neutral 50.0.

“The final quarter of 2006 has seen the expansion of the UK manufacturing sector gradually slip back to its trend level following the surprisingly robust performance seen in the middle of the year,” said RBS Group Chief Economist Dr. Andrew McLaughlin. “Manufacturers should see some welcome respite at the start of 2007 from a further easing in input price inflationary pressures. This may even support some growth in staffing levels as long as the current slowdown is not too deep or prolonged.”

To view the German report, click here.

For the UK report, click here.