Markit's Germany Manufacturing Purchasing Managers Index (PMI) was at 49.7 in January, down from 51.5 in December, and dipping below the neutral level of 50.0 points for the first time in more than four years. The decrease was attributed to a deepening downturn in new orders, which indicated their largest contraction in over six years.
Part of the reason for lower order books was a drop in demand from international markets, with surveyed firms reporting decreases in sales to the US, UK, Italy, Turkey and Asia (particularly China).
Despite the worsening order book situation, manufacturers maintained output growth at the start of the year. However, the extent to which production increased was only marginal.
The main highlight in January was a further solid increase in factory workforce numbers. Though the rate of job creation eased and was close to November's near two-year low, it remained elevated compared to the long-run average (since 1996).
Finally, the latest data showed that German manufacturers remained mildly pessimistic about the outlook, on balance expecting output to fall over the next 12 months.