Germany’s manufacturing sector has been expanding with confidence. In September, the S&P Global Germany Manufacturing PMI came in at 53.9, a slight dip from 54.3 in August but still well above the 50 threshold that separates growth from contraction.

German firms recorded a fourth consecutive month of rising new orders, led by makers of investment and intermediate goods. Exports also showed positive momentum thanks to stable demand from customers in Asia, Europe, and the US. The influx of new orders has pushed factory backlogs to accumulate at the fastest pace since April 2022.

Manufacturers’ business confidence reached a four‑and‑a‑half‑year high. The main source of optimism is the artificial intelligence boom: German plants expect to profit from strong technology demand and a global market recovery. Meanwhile, job cuts have halted, with employment declines easing to a three‑year low.

The one persistent problem is rising production costs. Manufacturing input cost inflation has reached June peaks amid outpriced electricity, shortages of electronic components, and high freight rates. Companies have passed much of the higher cost burden onto customers, lifting selling prices to a three‑month high. Ongoing logistical disruptions have also forced firms to buy commodities actively in advance — purchasing activity in the sector is at its strongest since May 2022.