BERLIN (Reuters). German manufacturers saw a slight increase in outputs during May. This was due to order backlogs and increased staffing. However, a continued decline in new orders means rough seas ahead. A survey released Wednesday.

S&P Global (NYSE:)’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the economy, came in at 54.8, barely changed from a flash reading of 54.7.

The largest European economy is still suffering from supply shortages. However, new orders revealed a weakening trend for May, after entering contractionary territory for nearly two years.

Both the upturn in production and decrease in new orders led to slower growth in work backlogs, which were found to be at their lowest level since July 2022.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, said demand was facing multiple headwinds, including uncertainty caused by the war in Ukraine, lockdowns in China and sharply rising prices.

Smith stated that while manufacturing output is still far behind demand in order to meet it, there has been a decrease in backlog accumulation.

The near-term operating environment for manufacturers is challenging in terms both of demand and supply. This is highlighted by the fact that expectations are still low and have remained at their lowest level for almost two years.