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Germany’s Manufacturing Activity Rose to 4-Month High in December

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Germany’s final manufacturing PMI rose to 53.2 in December

According to Markit, Germany’s manufacturing PMI (purchasing manufacturers’ index) rose to 53.2 in December 2015, compared to its November level of 52.9 level. Although German manufacturing activity rose to a four-month high in December, global manufacturing activity remained weak.

As a result, the iShares MSCI Germany ETF (EWG) fell 2.4% on January 4. German ADRs (American depositary receipts) Daimler AG (DDAIF), Volkswagen (VLKAY), SAP (SAP), and Deutsche Bank (DB) fell 3.9%, 2.8%, 2.5%, and 2.7%, respectively, on January 4.

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Strongest increase in export orders from Asia and the US

With strong demand from Germany’s domestic market as well as from foreign markets such as Asia and the US, the growth of new orders accelerated in December. The depreciation of the euro against major currencies boosted the export orders in Germany.

With an increase in new orders, manufacturers scaled up production activity. The strong expansions were seen from consumer, intermediate, and investment goods producers in December. Increased demand led to declines in post-production inventories and finished goods inventories in December.

Work backlogs accumulated in December

The inflow of orders resulted in building capacity pressures with German manufacturers. Although manufacturers added jobs to combat rising demand, the backlog accumulated in December.

With declining energy and commodity prices, cost inflation continued to stay at lower levels. After rising sale prices in November, German manufacturers have kept sale prices largely unchanged in December.

In December, German manufacturing maintained a sustained growth. With the inflow of new orders, Germany may contribute positively toward the revival of the Eurozone’s economy.

While Germany is growing at a healthy rate, let’s take a look at French manufacturing in the next article.

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