Germany: Composite PMI edges up to three-month high in May
IHS Markit’s composite Purchasing Managers’ Index (PMI) rose to a three-month high of 52.4 in May from 52.2 in April (previously reported: 52.1). The headline figure rose despite a drop in both the underlying services and the manufacturing sectors PMIs; however, the manufacturing output index rose to a three-month high, hinting at a bottoming out of the downturn in manufacturing, although output remained in contractionary territory. Moreover, in the April–May period, the composite PMI index trended above the average reading of the first quarter and suggests that economic growth will remain resilient in the second quarter.
The services sector expanded at a slightly softer pace in May compared to April on the back of the softest rise in output in four months, although output still increased robustly; in addition, new business inflows and job growth both eased. Meanwhile, operating conditions in the manufacturing sector deteriorated in May as output dropped for the fourth month running while new orders fell too, with anecdotal evidence pointing to weak demand stemming from a lackluster automobile industry and customer destocking. Manufacturing export sales continued to fall at a marked pace. As demand dynamics in the manufacturing sector remained weak, backlogs of work dropped for the seventh month in a row and jobs losses spiked to the highest rate since January 2013.
In terms of prices, input price inflation slowed to the weakest pace in over two-and-a-half years in May due to cheaper manufacturing purchasing prices. Cost pressures in the services sector, however, rose due to wage pressure. As such, manufacturing output prices rose at the softest pace since July 2017, while services output prices rose markedly, albeit at a one-year weak pace. Looking ahead, output expectations dropped to a 55-month low as confidence in the services sector eased to an over three-and-a-half year low.