Germany: Composite PMI falls to a four-year low in November
November 23, 2018
In November, the composite Purchasing Managers’ Index (PMI) dropped from a revised 53.4 in October to 52.2 in November, marking a near four-year low. Nonetheless, the index remained above the 50-point mark which separates expansion from contraction in the private sector.
The drop in the headline figure reflected softer expansions in both the services and the manufacturing sectors. Activity in the services sector eased to a six-month low on the back of slower growth in new business, particularly from abroad, and softening job growth. The manufacturing sector, meanwhile, expanded at the weakest clip in 32 months. This reflected a second consecutive drop in order books, due to a marked decline in goods exports, easing employment growth and a decrease in backlogs of work. Phil Smith, principal economist at IHS Markit, noted that “amid reports of falling sales to China, Italy and Turkey, manufacturers recorded the steepest monthly drop in new exports orders for almost six years.”
Although prices for goods and services rose markedly, they did so at a six-month low pace. Output price inflation reflected rising input price costs due to higher energy and fuel prices as well as staff pay. Manufacturers also suffered from raw materials shortages and delivery bottlenecks, driving input prices up.
Looking ahead, business sentiment towards the year ahead moderated to a four-year low as concerns over geopolitical tensions, automotive sector weakness and easing demand mount.
Author: Jan Lammersen, Economist