German manufacturing growth back at 4-year highs, PMI shows

BERLIN, Aug 3 (Reuters) - Germany's manufacturing sector enjoyed a strong start to the third quarter as business activity expanded in July at its joint-strongest pace since May 2022, helped by faster output growth and a rebound in export sales, a survey showed on Monday.

The S&P Global final Purchasing Managers' Index (PMI) for German manufacturing rose to 52.2 in July from 50.3 the month before, in line with a preliminary reading earlier this month and at the same high level as recorded in March.

A reading above 50 indicates growth, while below that figure signals contraction. 

"Germany's manufacturing sector made an impressive start to the third quarter, with a notable improvement in export sales helping drive the strongest production growth in nearly four-and-a-half years," said Phil Smith, economics associate director at S&P Global Market Intelligence.

Output rose at its fastest rate since February 2022 as firms cited stronger demand, higher capacity utilisation and efforts to clear backlogs. Outstanding business fell for a third straight month, though the pace of decline eased.

New orders increased for a second consecutive month and at the quickest pace since March, driven by export sales that grew at the strongest rate since February 2022. 

Cost pressures also moderated. Input price inflation slowed to its lowest since February, while output charge inflation eased for a third straight month to the weakest since March, although both remained elevated by historical standards.

However, Smith said it was difficult to imagine this performance being sustained without a resolution to the conflict in the Middle East, due to the corresponding volatility in oil prices and uncertainty.

"Indeed, business expectations remain subdued in the manufacturing sector, staying below the level seen prior to the outbreak of the conflict," he said. 

(Reporting by Miranda Murray; Editing by Toby Chopra)