More positively, the pace of job losses eased considerably, to show the weakest fall in factory employment for almost two years. Goods producers remained relatively optimistic about growth prospects in the year ahead, although the degree of confidence was down slightly from June's recent high.

On the price front, German manufacturers reported a further ' albeit slower ' drop in input costs, citing a lack of pricing power among suppliers and the influence of a strong euro.

Competitive pressures meant that goods producers passed on cost savings to customers, resulting in a third straight monthly reduction in average factory gate charges. Furthermore, the rate of decline was the quickest seen since February.

The headline HCOB Germany Manufacturing PMI registered 49.1 in July. This was up slightly from June's 49.0 and the highest reading for nearly three years.

Positive directional influences came from the employment, stocks of purchases and supplier delivery times components, offsetting the slower rises in both output and new orders.

The latest increase in manufacturing production was only marginal and the weakest recorded since the current sequence of growth began in March. Although backlogs of work fell again across the Germany manufacturing sector during July, they did so only slightly and at the joint-slowest rate for more than three years.

On the supply side, average lead times on purchases quickened only slightly in July, recording the smallest improvement for 18 months. Purchase prices faced by manufacturers meanwhile continued falling, amid reports of successful negotiations with suppliers and favourable exchange rates.

Looking ahead, German manufacturers remained relatively optimistic about the prospect of output levels rising over the coming year, with confidence levels running above the long-run average.

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