German manufacturing sees tentative signs of hope, PMI shows

(Reuters) - Germany's manufacturing activity fell in May, although the sector saw a third straight monthly increase in output driven by a continued rise in new export orders, according to a survey released on Monday.

The headline HCOB Germany Manufacturing Purchasing Managers' Index (PMI) registered 48.3 in May, slightly down from April's 48.4. A reading below 50 indicates contraction, marking the thirty-fifth consecutive month of sub-50 readings.

Despite the overall PMI remaining in contraction territory, production volumes increased for the third month in a row, supported by a second consecutive monthly rise in new export orders. International sales grew at a modest pace, with stronger demand reported across Europe and increased sales to the U.S., partly driven by stockpiling ahead of potential tariff increases.

"Most people have got so used to gloomy headlines from the industrial sector that the good news often slips under the radar," said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank AG. "Production has now increased for the third month in a row, and foreign orders have been on the rise for two straight months."

Employment continued to decline, although the rate of job shedding was the softest since January 2024. Purchasing activity came close to stabilising, marking the smallest decline since mid-2022, and contributing to a slower fall in input stocks.

On the price front, average factory gate charges showed a renewed decline, driven by competitive pressures and a further steep drop in input costs. Input prices eased again, influenced by factors such as lower oil prices and a stronger euro.

Business expectations rebounded in May, reaching the highest level since February 2022, buoyed by hopes of increased public sector spending and a potential trade agreement between the U.S. and EU.

(Reporting by Reuters; Editing by Toby Chopra)