Germany: Business conditions slump in August
The HCOB Global Composite Purchasing Managers’ Index (PMI) fell to 44.7 in August from July’s 48.5. August’s result marked the weakest reading since May 2020—just after the onset of the Covid-19 pandemic. As such, the index fell further below the 50.0 no-change threshold, signaling a sharper deterioration in private sector operating conditions compared to the previous month.
The deterioration was led by the Services PMI, which fell to 47.3 in August (July: 52.3). Meanwhile, the Manufacturing PMI came in at 39.1 in August, up from July’s 38.8.
The decline in business conditions in both the services and manufacturing sectors was sharper than that seen in the Eurozone overall. Germany’s economy continues to be especially hard hit by the war in Ukraine due to its dependence on exports to fuel growth and due to its past reliance on Russian gas imports. Output and new orders fell in both the services and manufacturing sectors, while employment stagnated in the services sector and fell in the manufacturing sector. Concerningly, input and output inflation rose for the first time in 11 and 7 months, respectively, in part due to a rise in fuel costs. More positively, businesses’ expectations for the year ahead improved slightly in both sectors.
HCOB’s Dr. Cyrus de la Rubia said:
“Any hope that the service sector might rescue the German economy has evaporated. Instead, the service sector is about to join the recession in manufacturing, which looks to have started in the second quarter. Our GDP nowcast model, which incorporates the PMI flash estimate, now indicates a deeper fall of the whole economy than it did before, at almost -1%.”