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Supply bottlenecks dampen outlook for German manufacturers -PMI

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FILE PHOTO: A steel worker of Germany's industrial conglomerate ThyssenKrupp AG stands a mid of emitting sparks of raw iron from a blast furnace at Germany's largest steel factory in Duisburg
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BERLIN (Reuters) - Supply bottlenecks hampered growth in German manufacturing activity for the third month in a row in October, a survey showed on Tuesday.

IHS Markit's Final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of Europe's largest economy, reached 57.8, slightly down from an initial "flash" reading of 58.2. The index stood at 58.4 in September.

The outlook for factories has been clouded by shortages of semiconductors and raw materials that are hitting the German auto industry particularly hard.

The shortages, coupled with rising energy prices, have forced manufacturers to pass the added costs on to consumers, raising fears of an inflation spiral that dampens both cosumption and growth.

"According to surveyed businesses, the well-documented slowdown in autos production is dragging down other parts of the manufacturing economy with it, as firms in that sector scale back orders for components and materials," said Phil Smith, Economics Associate Director at IHS Markit.

"Worryingly, the supply problems took a turn for the worse in October, with lead times on purchases lengthening to the greatest extent for three months," he said, adding that cost inflation has crept up towards record highs seen in the summer.

"Manufacturers lost further confidence that these issues will be resolved sooner rather than later, with business expectations now at their lowest since August 2020," he said.

(Reporting by Joseph Nasr; Editing by Hugh Lawson)

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