- Manufacturing PMI 42.5 vs 43.1 expected and 43.0 prior.
- Services PMI 51.0 vs 49.3 expected and 49.3 prior.
- Composite PMI 47.8 vs 47.5 expected and 47.2 prior.
Key findings:
- HCOB Flash Germany Composite PMI Output Index(1) at 47.8 (Nov: 47.2). 2-month high.
- HCOB Flash Germany Services PMI Business Activity Index(2) at 51.0 (Nov: 49.3). 2-month high.
- HCOB Flash Germany Manufacturing PMI Output Index(4) at 41.7 (Nov: 43.1). 3-month low.
- HCOB Flash Germany Manufacturing PMI(3) at 42.5 (Nov: 43.0). 3-month low
Comment:
Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“It looks like the German services sector is setting up for a better-than-expected Christmas season. The business activity
index bounced back into growth territory after dipping below 50 in November. Businesses also managed to hike their selling
prices a bit more than the previous month. This improvement in services is a good counterbalance to the quicker decline in
manufacturing output, giving some hope that GDP might not have shrunk in the last quarter of the year.
The manufacturing sector did not exactly deliver any holiday cheer. Output dropped much faster than in the previous two
months, and new orders fell at one of the quickest rates all year. This is certainly no big shock, given all the negative news
about companies planning restructurings.
What is really catching the eye is the trend in prices in the services sector. Input price inflation shot up significantly in
December, hitting the highest since April.
Normally, in a stagnating economy, you would expect disinflationary forces. The
fact that this is not happening suggests that old economic rules like “slower growth means slower inflation” might not apply at
the moment. Employees are still securing relatively high wage increases – negotiated wages grew by 8.8% in the third
quarter according to the Bundesbank. A chunk of this has been passed on to customers, with the output price index rising for
the second month in a row.
It is still a bit unclear whether the services sector is in a slow-motion downturn or on the brink of stabilization leading to
recovery. Services employment has been cautiously cut since July, and new business has been shrinking slowly since
September. If this trend continues, a recession in this sector seems likely.
However, with real wages rising, people’s
spending power has increased, which should boost consumption and is especially good for the services sector. We are
inclined to expect a recovery in the German services sector, buoyed by improved sentiment over future activity and the
upcoming snap elections in February, which should bring more political clarity.”
Germany Composite PMI