The HCOB Germany’s Manufacturing PMI dropped to 42.5 in December 2024, down from 43 in November and falling short of market expectations of a slight improvement to 43.1, according to preliminary data. This reading highlights a deepening contraction in Germany’s manufacturing sector, as the industry’s struggles with declining demand and economic uncertainty persist.

Output and New Orders See Sharper Declines

December saw manufacturing output in Germany decline at a significantly faster pace than in the previous two months. New orders fell sharply, marking one of the steepest drops of the year, underscoring weaker demand both domestically and internationally. The decline in outstanding business also accelerated, reflecting ongoing challenges in maintaining production activity amid shrinking order volumes.

Job Losses and Cost Trends

In response to falling demand, manufacturers continued to scale back operations, leading to another wave of staff retrenchments. While the pace of job losses eased slightly, it still marked the sector’s fourth consecutive month of workforce reductions. On the cost side, input price declines showed signs of slowing, but they failed to offset the overall challenges faced by manufacturers.

Subdued Sentiment as 2024 Closes

Sentiment among German manufacturing firms remained particularly subdued, reflecting ongoing concerns over weak demand and broader economic headwinds. As Germany heads into 2025, the manufacturing sector’s recovery may depend on addressing structural issues, revitalizing global trade dynamics, and restoring confidence among businesses and consumers. Without targeted measures, the outlook for the sector remains uncertain.