A serious warning signal came from the German economy, and Hungary may also be worried

The final HCOB purchasing managers’ index (PMI) for manufacturing, which accounts for a fifth of the German economy, fell to 43.2 from 44.5 in April, the fourth consecutive monthly decline and the lowest since 2020, according to Reuters.

The manufacturing PMI remains below the 50 level that separates growth from contraction through July 2022.

Goods producers in the euro zone’s largest economy faced a sharp decline in new orders in May, the report said.

The decline in demand was also reflected in manufacturing, which contracted for the first time in four months.

“Manufacturing is headed for tough times,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank AG.

Companies, particularly those exporting to China, Europe and the US, have seen demand decline.

Manufacturers’ expectations about future production are pessimistic. An indicator for purchasing raw materials also fell, a bad sign for domestic manufacturing players and suppliers due to the interconnectedness of the Hungarian and German economies.

At the same time, “companies continue to increase employment, and in an environment where input prices are falling significantly, they are still able to command slightly higher selling prices, which is good for profit margins,” de la Rubia said.

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