Germany manufacturing PMI highest since 2022

The HCOB Germany Manufacturing PMI rose to 49.9 in August 2025 from 49.1 in July, surpassing market expectations of 48.8, according to flash estimates.

The latest reading marked the highest since June 2022, signaling that the sector is edging closer to stabilization after a prolonged downturn. Although still just below the 50-mark that separates expansion from contraction, the data indicates that conditions in German manufacturing are beginning to improve.

A key driver of the stronger performance was a solid acceleration in factory output, supported by a notable rise in new factory orders. New orders expanded at their fastest pace since March 2022, with domestic demand showing particular resilience, especially in capital goods and machinery. However, export sales slipped slightly, breaking a five-month streak of gains, as global trade headwinds from protectionist measures and slower international demand weighed on foreign orders. The decline was modest, suggesting that Germany’s export engine remains vulnerable but not yet in significant retreat.

Despite improvements in output and orders, employment in the manufacturing sector continued to decline, with the pace of job losses accelerating. Companies cited restructuring, automation, and efficiency measures as reasons for trimming staff, underscoring concerns that any recovery in production may not translate into near-term job creation.

On the price front, input cost inflation eased further, aided by falling oil prices, relatively stable commodity markets, and the support of a stronger euro that helped reduce import costs. This offered some relief to manufacturers who have faced significant cost pressures over the past two years, though wage growth and energy volatility remain key uncertainties. Output charges rose only modestly, pointing to limited pricing power amid still-muted demand conditions.

Business sentiment improved slightly compared to July, with firms expressing cautious optimism that a bottoming-out in the manufacturing cycle is underway. However, optimism remains restrained when compared with the services sector, which continues to show more subdued expectations amid broader economic uncertainty. Policymakers and investors alike will be watching upcoming data on industrial production and trade balances to confirm whether the nascent stabilization in German industry can be sustained into the second half of the year.