According to data released by S&P Global, Germany’s Manufacturing Purchasing Managers’ Index (PMI) fell to 50.1 in May from 51.4 in April. The index remaining just above the 50-point threshold that separates growth from contraction indicated that the sector’s fragile outlook continues.
The May data revealed the first decline in new orders received by German manufacturers in 2026. While some companies reported that customers brought forward orders to avoid potential price increases and supply chain disruptions caused by the conflict in the Middle East, it was emphasized that high costs and the overall climate of uncertainty weighed on overall demand.
Consumer goods producers recorded a sharp decline in orders, while export sales also fell for the first time since January.
Job losses accelerated in factories
Phil Smith, Associate Director of Economics at S&P Global Market Intelligence, stated that the recovery in Germany’s manufacturing sector came to a halt in May. Smith noted that signals from recent PMI surveys suggesting that growth driven by front-loaded orders would lose momentum had now been confirmed.
Pointing out that new orders declined for the first time this year due to high uncertainty and rising prices, Smith said that the underlying weakness in demand had become apparent.
Smith stated that cost pressures in the manufacturing sector continue to increase, but producers remain cautious about pricing due to weak demand. “In an environment where profit margins are under pressure, something had to give, and that ‘something’ was employment. Job losses in factories reached their highest level since the beginning of 2025,” he said.
Smith added that business expectations for the future improved slightly from the low level seen in April, supported by hopes for a possible agreement that could bring an end to the conflict in the Middle East. However, he cautioned that, “Even if a peace agreement is reached and we begin to see the Strait of Hormuz reopening, disruptions within the system and strong inflationary pressures will continue for some time.”
Source: AA
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