German manufacturers' outlook brightens but orders keep falling in Jan - PMI

Visit to BMW site in Berlin

BERLIN (Reuters) - German manufacturers started the year with a slightly brighter outlook on the year ahead despite the fact that orders continued to fall, as inflation and supply chain problems eased, a survey showed on Wednesday.

S&P Global's final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of Germany's economy, rose to 47.3 in January from 47.1 the previous month.

It was the third consecutive month of improvement although that upward trend lost some steam in January. The main drag on the headline index was still new orders, even as the rate of decline in that sub-index slowed for the third straight month as well.

The German manufacturing PMI has been languishing below the 50 mark since July, indicating shrinking activity.

A Reuters poll of analysts had pointed to a slight decline in January with an estimate of 47.0, in line with an earlier flash reading.

There were ongoing concerns about the current picture of demand across the sector but businesses were approaching the year with cautious optimism, said Phil Smith, Economics Associate Director at S&P Global Market Intelligence.

"German manufacturers are now cautiously optimistic towards growth prospects over the coming year, with more firms expecting a rise in output than a decline for the first time since before Russia's invasion of Ukraine," Smith said.

The sub-index for future output improved to 53.5 in January, up from 48.8 the previous month and back in positive territory for the first time since February 2022 when the war began.

"Expectations nevertheless remain historically subdued, amid a backdrop of still-high inflation and economic uncertainty," he added.

(Reporting by Rachel More; Editing by Hugh Lawson)