Manufacturing (Germany):
Slight worsening of the business climate

The current business situation in manufacturing remained favourable with some weakening vis-à-vis June. In durable consumer goods there was even an increased preponderance of positive assessments. On average for manufacturing, the increase in new orders and in production continued, albeit in weakened form, and order reserves are above normal levels. Reports of excess inventories still play only a minor role, and producers of durable consumer goods even reported some delivery bottlenecks. In the course of the second quarter, capacity utilisation decreased somewhat (86.8%) and is only a half a percentage point above the level 12 months ago. Also the depth of order reserves has decreased somewhat - to 2.9 production months. With regard to the six-month outlook, confidence was slightly higher but it weakened somewhat in terms of export business. Competitiveness of the firms has improved in recent months both in domestic and in foreign markets, even in those outside the EU, despite the stronger euro. Production plans point to virtually uninterrupted increases, with the responses to the question on production constraints indicating that the lack of skilled personnel has become more of a problem. In the coming months, staff levels should increase somewhat. In eastern German manufacturing confidence in both the current situation as well as in the business outlook weakened over the previous month. Export expectations, in contrast, were more positive. No change in the expansive production plans was evident, and the hiring propensity has even become stronger.