Germany: Composite PMI drops in September on weakening momentum in the manufacturing sector
In September, the composite Purchasing Managers’ Index (PMI) eased to 55.3 from 55.6 in the previous month (previously reported: 55.7). Despite the moderation, the index remained firmly above the crucial 50-point threshold that separates expansion from contraction in the private sector economy.
The moderation was due to softening momentum in the manufacturing sector, with the manufacturing PMI falling to an over two-year low. This was a result of slower—albeit still robust—employment growth and a decrease in backlogs of work. Meanwhile, the services PMI reached an eight-month high in September thanks to a sharp increase in new business. Job growth in the service sector was solid, despite dipping slightly from August’s pace.
Inflationary pressures eased somewhat in September owing to a weaker increase in service sector output prices and softening input cost inflation. However, input cost inflation was still high by historical standards, with firms noting higher prices for energy, steel and labor in particular. Looking ahead, business confidence decreased to a four-month low, reflecting a sharp drop in sentiment among manufacturers, which contrasted higher confidence in the service sector.
Commenting on the September result, Phil Smith, Principal Economist at IHS Markit, stated: “Services providers enjoyed the biggest boost to new business in over seven years in a further of strong domestic demand. Manufacturing new orders, however, were broadly flat as export sales declined for the first time in more than three years.”