German manufacturing output rises in September but expectations sink

Germany's manufacturing output showed record growth in September, but forward-looking indicators weakened, S&P Global reported on Wednesday.

The headline Hamburg Commercial Bank manufacturing purchasing managers' index declined to a two-month low of 49.5 points in September from a 38-month high of 49.8 in August. However, it surpassed the flash reading of 48.5 points.

The manufacturing output index rose to 53.0 points in September from 52.9 in August, showing the sector's "strongest production growth in three-and-a-half years".

"The attempt to break through the expansion mark of 50 has failed," commented HCOB Chief Economist Cyrus de la Rubia. "By August, the headline PMI had crept up to just below the critical 50 threshold in several steps, but now there has been another setback, which accurately reflects the fragile situation in the manufacturing sector.

"Most recently, it was a decline in new orders that has weighed on the manufacturing sector. This development is likely to mean that output, which rose quite solidly in late summer, will grow only marginally in the coming months, if at all."

De La Rubia continued: "Looking at the production figures in isolation, the manufacturing sector appears to be enjoying a healthy upturn, as output has been rising for seven months now. However, other indicators suggest that companies are already preparing for another downturn, as job cuts are continuing at a relatively high pace and inventories of purchased materials are also being reduced, albeit at a slightly slower rate than in previous months.

"It is quite obvious that the German government's announcements of strong growth in investment and defence procurement in the new budget for 2026 are only being given limited credence. Accordingly, confidence in future production increases has declined to a modest level."

Business expectations for output over the next 12 months, meanwhile, reached their lowest level for the year to date, S&P said.

Also, September saw inflows of new work declining for the first time in four months, although the decrease was "only marginal", and German manufacturers scaled back purchasing activity for the second consecutive month.

The HCOB manufacturing PMI is compiled by S&P Global from survey responses by purchasing managers in a panel of around 420 manufacturers in Germany. The latest data was collected between September 11 and Tuesday last week.

The services and composite PMI readings will be released by S&P Global on Friday.