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Germany PMI August 2018

Germany: Composite PMI reaches highest level in August since February

The German economy firmed up at the start of the third quarter. The composite Purchasing Managers’ Index (PMI) increased to 55.7 in August from 55.0 in July (previously reported: 54.8). The result marked the third consecutive uptick in the index and the highest reading since February this year. As a result, the PMI—which is the result of a survey of 1,000 manufacturing and services firms across the country—moved further above the crucial 50-point threshold that separates expansion from contraction in Germany’s private sector.

The uptick came chiefly on the back of an increase in the services PMI. Business activity in the services sector benefited from a pick-up in demand levels, with new business orders rising at the fastest clip since February. In addition, employment growth in the service sector accelerated. However, the manufacturing PMI dipped in July. The manufacturing sector saw new orders increase at a slower pace owing to softer foreign demand, leading to slower employment growth. Across the economy as a whole, backlogs of work continued to increase on the back of higher workloads.

Inflationary pressures remained elevated in August, as both input and output prices increased at a sharp pace. Input prices rose owing to higher prices for raw materials and increased salary costs, while output price inflation rose particularly sharply in the services sector.

Looking ahead, business confidence regarding the next 12 months increased, thanks to a rosier outlook on expected business conditions among services sector firms. This more than offset a softening of confidence in the manufacturing sector.

Commenting on the August result, Phil Smith, principal economist at IHS Markit, stated:

“German business continued to display remarkable resilience during August, with the latest PMI data going some way to dispel any fears about a global trade slowdown and its impact on the health of the economy.”

Germany Fixed Investment Forecast

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