German manufacturing expands in March despite Iran war supply strains, PMI shows

BERLIN, April 1 (Reuters) - Germany's manufacturing sector expanded in March at its fastest pace since May 2022 as output and new orders grew despite supply disruptions tied to the Iran war, a survey showed on Wednesday.

The S&P Global final Purchasing Managers' Index (PMI) for German manufacturing rose to 52.2 in March from 50.9 in February, coming in slightly above an earlier "flash" reading of 51.7.

A reading above 50 marks growth, below signals contraction.

Signs of stress are already starting to show across the supply chains, said Phil Smith, economics associate director at S&P Global Market Intelligence, adding that lead times on inputs have lengthened to their greatest extent since mid-2022.

"This has helped boost the headline PMI, due to the assumption that longer delivery times are usually associated with increased demand," he said.

March saw stronger rates of output and new order growth, as surveyed businesses signalled that the boost was tied to demand from customers looking to mitigate disruptions.

Production grew at the steepest pace since February 2022, while new orders increased for a third straight month, at the quickest rate since March 2022.

Smith added that the immediate impact of the war was clear to see.

"Most notably, input cost inflation has spiked higher on the back of the surge in oil and gas prices, registering its largest single-month rise on record," he added.

The input prices index posted a record monthly rise, hitting 70.3 in March from 59.4 the month before, which was also its highest level since October 2022.

Factory gate inflation accelerated to a 37-month high as manufacturers passed on part of the higher burden.

Manufacturers' output expectations over the next 12 months fell to their lowest since November, with anecdotal evidence pointing to price concerns and uncertainty associated with the war, after expectations had reached a four-year high in February. (Reporting by Miranda Murray; Editing by Hugh Lawson)