Germany: Composite PMI records worst reading in over two years in September
September 23, 2022
The S&P Global Composite Purchasing Managers' Index (PMI) dropped to a 28-month low of 45.9 in September, down from August's 46.9. As a result, the index fell further below the 50.0 no-change threshold, signaling a deterioration in business conditions from the previous month.
The headline deterioration in PMI was driven by a substantial reduction in demand and a deterioration in expectations with regard to output. Demand weakened against a backdrop of persistently high inflation—mainly driven by elevated energy costs—and heightened economic uncertainty. Input cost inflation accelerated for the first time in five months on the back of a rise in energy costs. Employment increased at a softer pace, as capacity pressures moderated. Higher interest rates and an increased wage bill added fuel to the fire. Consequently, output price inflation picked up steam, particularly in the services sector.
Phil Smith, economics associate director at S&P Global Market Intelligence, commented:
“The German economy looks set to contract in the third quarter, and with PMI showing the downturn gathering in September and the survey’s forward-looking indicators also deteriorating, the prospects for the fourth quarter are not looking good either.”