Germany: Composite PMI records worst reading since June 2020 in July
The S&P Global Composite Purchasing Managers’ Index (PMI) came in at 48.0 in July, down from June’s 51.3. July’s result marked the weakest reading since June 2020. As a result, the index dropped below the 50.0 no-change threshold, signaling a deterioration in business conditions from the previous month.
The headline deterioration was driven by a broad-based worsening of operating conditions partly on the back of the fallout from the war in Ukraine: The Manufacturing PMI came in at 49.2 in July, down from June’s 52, while the services PMI activity index fell to 49.2 in July (June: 52.4). Greater economic headwinds amid elevated inflation, the energy crisis and supply-chain issues weighed on demand, both domestic and foreign. Nonetheless, employment continued to increase; however, the tight labor market is likely beginning to affect the services sector as firms reported staff shortages. Turning to prices, input prices remained elevated due to greater commodity prices, a weaker euro and rising interest rates as well as a greater wage bill. Consequently, output price inflation remained elevated despite the rate of increase dropping to a five-month low.
Paul Smith, economics director at S&P Global Market Intelligence, commented:
“Having enjoyed a growth boost from the previous easing of virus-related restrictions, a collision of various headwinds in July served to push the German economy into contraction territory for the first time in 2022 so far.”