German manufacturing faces correction risks amid dual pressure from inflation and supply delays

Golden Ten Data reported on May 4th that Phil Smith, Deputy Chief Economist at S&P Global Market Intelligence, stated: Panic buying to secure supply, driven by concerns over future price increases and shortages, continues to support Germany’s output and new orders. This advance activity could lead to some pullbacks in the coming months. While we are seeing strong growth in new orders for intermediate goods (i.e., products used in the production of other goods) manufacturers, demand for consumer goods has clearly declined. The number of businesses now expecting activity to fall over the next year exceeds those expecting growth. There are concerns that soaring inflationary pressures and the resulting squeeze on purchasing power will dampen demand, with producer price inflation in April surging to its highest level in over three years. Meanwhile, as supply delays have reached levels not seen since mid-2022, there is a risk that production could be cut back regardless of demand conditions.