Brandenburg Gate in Berlin, Germany

Germany PMI July 2018

Germany: Composite PMI edges up on the back of a resilient manufacturing sector

The German economy is seemingly regaining its footing after a disappointing start to the year. The composite Purchasing Managers’ Index (PMI) increased to 55.2 in July from 54.8 June, marking the second consecutive uptick in the index. Moreover, July’s result marks a five-month high, and the PMI—which is the result of a survey of 1,000 manufacturing and services businesses across Europe’s biggest economy—moved further north of the critical 50-point threshold that separates expansion from contraction in Germany’s private sector.

The faster rate of expansion reflected broadly stable activity in the services sector, while manufacturing output expanded at the quickest pace since April. Activity in the manufacturing sector increased thanks to robust rises in output, new domestic and export orders and stocks of purchases. Due to increased activity in the private sector, employment growth remained at a historically high level.

Inflationary pressures picked up in July as input price inflation increased for the third consecutive month, driven up by higher wages and fuel prices. Inflationary pressures were further intensified by higher steel prices and supply shortages from China. As a result, average output prices rose at the fastest pace in five months in July.

Looking ahead, business confidence regarding the remainder of the year remained subdued as future output expectations remained at a low level. Sectoral data showed, however, that sentiment trends diverged: Firms in the manufacturing sector were more upbeat in July than in the prior month, whereas businesses in the service sector held less rosy views. Business sentiment among services firms reached its lowest level since December 2016.

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