Easing of supply shortages sustains German manufacturing recovery

BERLIN, (Reuters) – Strong output growth in Germany helped by easing supply issues pushed activity in Germany’s manufacturing sector to a maximum of five months in January, according to a Monday survey.

IHS Markit flash Purchasing Managements’ Index (PMI), revealed that the activity in manufacturing rose to 60.5 in December, from 57.4 during December.

After shrinking in December and reaching a record 52.2 in February, activity in the service sector rose to an all-time high of 52.2. This was despite a negative forecast.

The flash composite PMI which measures the production and service sectors together that account for more then two-thirds the German economy, increased to 54.3 from 49.9 in March.

These results showed the strength of Germany’s economy, whose recovery from pandemics was slowed last year due to supply shortages. There were also fears about Omicron variants causing crippling lockdowns.

Phil Smith, IHS Markit’s Economics Associate Director said, “Manufacturing will see a rebound in 2022 when supply bottlenecks recede, but we already have seen growth at this rate,”.

The data “all in all, they mark a positive beginning to the year” and help ease concerns about Omicron impacting the German economy in its first quarter. “However rising input costs are still a problem for businesses with survey data showing that they continue to increase sharply, on several fronts, the data from Omicron shows.”