Germany Manufacturing Purchasing Managers' Index (PMI) fell to 51.4 in August from July's 52.4. Although still signalling an improvement in operating conditions, the latest reading was the lowest since September last year.

Production levels increased at the slowest pace in over a year in August, with companies commenting on a relatively weak economic environment.

Moreover, sector data suggested that a sharp drop in consumer goods output was more than offset by expansions in the intermediate and investment goods sectors. In line with the weaker trend for output, new orders rose at the slowest pace in the current 14-month period of continuous expansion. New export orders also increased at a lower rate, which some companies linked to the Russian sanctions. Increased demand from Asian markets meanwhile resulted in the overall rise in new export work.

Reflective of some pessimism for future activity, companies reduced their workforce numbers and lowered their purchasing activity in August. Employment fell for a third month running, while buying activity declined for only the second time since June last year.

Despite slower new order growth, backlogs of work accumulated for a third month running and at the quickest pace since April. Meanwhile, vendor performance deteriorated further, with some panellists commenting on shipping delays from Asian markets. The pace at which average lead times lengthened was the sharpest in more than three years.

The latest survey results pointed to a further decline in input prices at Germany's manufacturing companies. The rate of cost inflation was broadly unchanged since the previous month and marginal overall. Nevertheless, companies were able to further raise their selling prices. The rate of charge inflation accelerated since July and was the sharpest since the beginning of the year.

Oliver Kolodseike, economist at Markit and author of the report said, "Warning lights are flashing in Germany's goods-producing sector after the headline PMI fell to an 11-month low in August.  The survey data suggest that manufacturing appears to be in the midst of a slowdown, with output and new order growth slowing to only marginal rates that were well below the levels seen at the beginning of the year.

"Pessimistic signals about future workloads are meanwhile sent by further employment cuts and a reduction in buying activity. It seems as if the manufacturing recovery could be put at risk, if these trends continue in the near future."

"Official data showed that industrial production fell 1.5% in the three months to June, the sharpest drop in nearly one-and-a-half years. PMI data  meanwhile suggest  that  it is unlikely that  the strong growth  rates seen  earlier  in  the  year will  return  in the coming months."