Economic Buzz: German manufacturing PMI climbs into growth territory for first time in over three-and-a-half years in February

Germany?s manufacturing sector returned to growth in February, according to the latest HCOB Manufacturing PMI data. The headline index rose to 50.9 from 49.1 in January, moving above the 50 mark that signals expansion for the first time since June 2022.

The improvement was driven by stronger output and a solid rise in new orders, which increased at the fastest pace in nearly four years. Companies reported better demand both at home and abroad, with export orders also edging higher. Production expanded for the second month in a row, with growth accelerating compared to January.

Employment continued to decline, but job losses were the slowest in seven months. There were also early signs of rising capacity pressures, as backlogs of work increased slightly for the first time since May 2022. Purchasing activity stabilized after six months of decline, and inventories fell at a slower pace.

At the same time, cost pressures intensified. Input prices rose at the fastest rate in over three years, driven by higher raw material, energy, wage and component costs, as well as the Carbon Border Adjustment Mechanism. Manufacturers raised their selling prices modestly.

Business confidence improved for the fourth straight month, reaching its highest level since February 2022.

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