The latest HCOB PMI survey showed stronger growth in both production and new orders across the German manufacturing sector in August, with the pace of expansion in output at its highest in nearly three-and-a-half years.

Nevertheless, not only did goods producers remain in job-cutting mode, with employment even falling at a quicker rate than in July, but they also signaled a renewed decline in purchasing activity and further marked decreases in stocks.

This coincided with slightly less optimism about the year-ahead outlook. On the price front, latest data showed sustained declines in both input costs and output prices across the German goods producing sector, with the latter falling at the quickest rate for six months. The rise in the headline index was driven mainly by its two largest components, namely new orders (30% weight) and output (25%). The current upturn in production meanwhile extended to six months.

August also saw the first decrease in purchasing activity among German manufacturers for three months. Staffing capacity was scaled back further during August.

Delivery times on purchased inputs quickened only fractionally midway through the third quarter, registering the smallest improvement for almost three years. By contrast, average factory gate charges fell at a quicker rate ' the steepest seen since February.

Lastly, August survey data indicated a slight weakening of German manufacturers' growth expectations for the year ahead. Optimism retreated further from June's recent peak, although it was still stronger than the long-run series average.

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