Germany: Composite PMI falls to multi-year low in October
October 24, 2018
The composite Purchasing Managers’ Index (PMI) dropped from a revised 55.0 in September to 52.7 in October, marking the softest pace of growth in private sector business activity in nearly three-and-a-half years and below the long-term average of 53.4. However, the index remained above the 50-point mark that separates expansion from contraction in the private sector.
The moderation came on the back of softening momentum in both the services and the manufacturing sectors, with the latter expanding at the slowest pace in over two years. This was partly due to weakening foreign and domestic demand dynamics. New export orders eased for the second consecutive month in the manufacturing sector, and manufacturers’ total order books contracted for the first time in nearly four years. Moreover, new orders growth in the services sector slowed. However, despite softening demand levels, employment growth remained robust in both sectors.
Inflationary pressures remained elevated on the back of a marked uptick in input costs—due to higher oil prices—which led firms to hike output prices to protect their profit margins. Output price inflation in the services sector was the strongest in the survey’s history.
Looking ahead, business confidence towards the year ahead reached a four-year low as uncertainty over the trade war, tariffs and Brexit weighed on sentiment, with the mood among manufactures turning pessimistic for the first time in several years.
Author: Jan Lammersen, Economist