Germany: Composite PMI eases slightly at the start of the year
January 24, 2018
The IHS Markit flash composite Purchasing Managers’ Index (PMI) came down marginally from the prior month’s record high of 58.9 to 58.8 in January. Nonetheless, the PMI, which is the result of a survey of over 1,000 manufacturing and service businesses based in Germany, remained comfortably above the crucial 50-point that separates expansion from contraction in the private sector.
December’s result indicates that, despite the marginal moderation, the strong growth momentum in 2017 carried over into 2018. The momentum was sustained by the quickest rise in business activity in the service sector in seven years; however, growth in the manufacturing sector slowed from the previous month. The composite PMI reflected solid growth in new businesses, both domestic and foreign, although external demand slowed.
The rate of job creation picked up pace to the fastest rate in nearly seven years in the manufacturing sector. Backlogs of work increased, however, as employment gains have not been able to reduce the backlog since mid-2016. In terms of prices, input costs rose at the fastest pace since April 2011 as manufacturer demand for raw materials outpaced supply, creating a shortage of inputs. Higher input prices were passed on to consumers, leading output prices to increase at the strongest pace in nearly seven years.
Phil Smith, Principal Economist at IHS Markit, commented that, “Undeterred by ongoing political uncertainty and rising cost pressures, firms showed strong optimism towards the outlook for 2018, with the degree of confidence the highest since comparable records began in mid-2012.”
Germany Investment Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 3.8% in 2018, which up 0.2 percentage points from last month’s forecast. For 2019, panelists expect fixed investment to grow 3.2%.
Author: Jan Lammersen, Economist