Manufacturing (Germany):
Production cut-backs

In manufacturing the business climate index continued its decline. The current business situation was assessed more unfavourably by the firms than in the previous month but continues to be seen as satisfactory. The demand situation deteriorated and production plans call for reductions. Also in export business the survey participants expect a weakening. Both the producers of intermediate inputs and the capital goods manufacturers are less satisfied with their business situation and now a majority of them assess their order cushion as too small. Precisely the manufacturers of capital goods had reported sufficient order stocks even up to September. This appraisal has moved into negative territory and orders on hand do not assure as much production in the future as was previously the case. Consumer goods producers are somewhat less dissatisfied with their business situation. The development of demand is no longer quite so bad and complaints of too small order stocks have declined. To asses the business-cycle climate in manufacturing, a look at the capacity utilisation rate is helpful. This is queried quarterly in the Ifo Business Survey. The firms utilised their production capacities considerably less intensively in October than in July, the last time this factor was surveyed. Nevertheless, the capacity utilisation rate is still at a slightly above-average level. This holds for manufacturing as a whole as well as for all three main groups - intermediate inputs, capital goods and consumer goods. This confirms that the current situation in manufacturing can be regarded as satisfactory. In the next six months, however, the firms expect a considerable worsening in business activity. For this reason production plans include a noticeable restriction in output, and firms do not plan to take on additional personnel.