- Prior 50.1
- Composite PMI 50.6 vs 50.5 prelim
- Prior 47.7
It’s a mild revision to the preliminary estimates as both the German services and composite readings are at 10-month highs. The good news is that activity is picking up with new business also facing an upturn. However, price pressures remain stubborn and will be one to watch in the months ahead. Service firms raised their own prices on the month as cost inflation remains well
above the historical trend rate. HCOB notes that:
“Wow, what a jump. The German service sector, which was still in the doldrums at the start of the year, is recovering fast. In
an encouraging sign, not only did activity expand at the quickest rate in ten months but there were also recoveries in new
and outstanding business as well as employment. With respect to the latter, companies have hired more staff for four
straight months, which we see as evidence of firms’ confidence that their business will remain healthy in the near future.
“The outstanding business index has exceeded the 50 threshold for the first time since mid-2023. While this is just a monthly
figure, we anticipate that new business will continue to grow, contributing to a sustained rise in outstanding business. This
trend can be attributed to increasing purchasing power amid lower inflation and higher wages.
“Service providers continue to grapple with rapid increases in input costs, encompassing wages and energy expenses.
Encouragingly, from a corporate perspective, firms have managed to partially pass on these higher costs to their clients. We
interpret this pricing power as a further indication of the overall healthiness of the service sector.
“The German economy, long weighed down by the struggles of the manufacturing sector, finds itself back in growth territory
thanks to the resilience of service providers. Surpassing the 50 mark for the first time since June 2023, the HCOB
Composite PMI signals a positive shift. However, this doesn’t imply that Germany will now storm ahead. Instead, it’s more
akin to a gentle breeze. Our GDP nowcast, factoring in the HCOB PMIs among other indicators, projects a modest growth
rate of just 0.1% for the second quarter.”