BERLIN, (Reuters) – Supply issues dampened German manufacturing activity last September, a survey revealed on Friday. In response to factories reporting a fall in orders and production constraints, the report said that there was a decrease in demand.

IHS Markit’s Final Manufacturing Purchasing Managers’ Indice (PMI) was at 58.4, which is slightly lower than an August flash reading (58.5), and down from 62.6.

The largest economy in Europe has been running smoothly during the pandemic, almost unaffected by the lockdowns which have affected the services sector. Activity accelerated this year due to strong demand from China and the United States.

However, the sector has been hit hard by shortages in intermediate goods such as semiconductors and raw materials. Companies that are worried about shortages dragging on to next year’s forecasts for growth have begun to complain.

New orders growth fell to a 15 month low

Phil Smith, IHS Markit’s Economics Associate Director said that “supply bottlenecks continue driving up input costs, and in turn put pressure upon manufacturers to increase prices which is acting as an additional headwind for growth.”

He said that although the rate of inflation in input prices looks as though it has peaked, the pace is still the fastest ever recorded. This leads to an unprecedented number of producers of goods raising their prices. “Manufacturers are losing their optimism about the future, which dropped to its lowest level in 13 months in September.”

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