Germany's manufacturing sector struggles to meet demand in August

BERLIN Reuters - German manufacturers struggled to meet strong demand for industrial goods in August as raw materials shortages for raw materials and components such as semiconductors continued to hold back production and push up prices, a survey shown on Wednesday.

IHS Markit PMI final Purchasing Managers Index for manufacturing, which accounts for about a fifth of Europe's biggest economy, fell in July to 62.6 from 65.9.

That was the lowest in six months, but still comfortably above the 50 mark that separates growth from contraction.

The German economy rebounded in the second quarter with a growth rate of 1.6% compared to the previous three months as aneasing of COVID 19 curbs spurred consumers to dip into record savings piled up during winter lockdown.

The government expects the economy to grow 3.5% this year and 3.6% next, though supply bottlenecks and rising COVID - 19 cases are leading companies to take a dimmer view.

Corporative efforts to increase industrial production in light of vibrant demand were often hampered by supply shortages for basic materials and intermediate products, the survey showed.

Growth in output has now fallen behind that of new orders to an extent previously unseen in over 25 years of data collection, IHS Markit economist Phil Smith said.

The supply bottlenecks enacted rising backlogs of work, falling stock levels and acute price pressures in Germany's large manufacturing sector. Among the items most commonly reported as having risen in price by survey respondents were aluminium, electronics, plastic, steel and timber.

Supply problems and related price pressures also clouded the outlook in manufacturing with the subindex on firms' optimism about future activity falling to its lowest level since October last, the survey showed.

Still, many goods producers are hopeful that conditions will have improved come next summer, and a further sharp rise in employment levels shows that efforts are still being made to prepare for higher output in the future.