The downturn, which was driven in large part by falling export sales, also led to deeper cuts to employment, purchasing and stocks of inputs.

Elsewhere, the latest data pointed to tighter supply-side conditions, with lead times on purchases lengthening for a fourth straight month and input costs rising for the first time in almost three years.

Competitive pressures nevertheless led to a further decrease in factory gate prices. More positively, manufacturers remained optimistic about the outlook for production, with expectations climbing to their highest in six months.

The headline HCOB Germany Manufacturing PMI fell deeper into sub-50 contraction territory in December, dropping from 48.2 in November to a ten-month low of 47.0.

The deterioration in business conditions was exemplified by a renewed fall in production. Output levels had previously risen for nine months in a row before recording a modest decline in the final month of the year.

German manufacturers scaled back production having faced another drop in new orders in December ' the third decrease in the past four months.

German goods producers remained firmly in retrenchment mode, cutting employment, purchasing activity and stocks at the end of the fourth quarter.

As for the outlook, December's survey brought more encouraging news, showing business expectations improve for the second month in a row and reach the highest since last June.

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