Germany: Flash PMI falls in February, points to modest expansion
February 22, 2016
Markit’s composite Purchasing Managers’ Index (PMI) dropped from January’s 54.5 to 53.8 in February, marking the second consecutive decline following December’s 17-month peak. Nevertheless, the composite PMI—the result of a survey of over 1,000 manufacturing and service businesses based in Germany—remains above the 50-threshold, where it has been since April 2013.
February’s decrease was driven by a weaker PMI reading for manufacturers. In fact, the sub-index fell to the lowest level in over a year and now just sits closely above the 50-threshold. Conversely, the PMI for service providers improved marginally in February. Total output grew at a slower rate in February, mainly due to a deceleration among manufacturers, while activity at service providers picked up slightly. New orders expanded at a steady rate in February, reflecting that increasing new business at services offset decreasing orders at manufacturers, which particularly suffered from weak export orders. While backlogs of work rose, the pace of job creation decelerated. Manufacturing input prices continued their decline and recorded the largest drop in over six years, largely due to falling prices for oil, energy and raw materials. Input prices at service providers also fell, albeit to a lesser extent. Conversely, output charges rose.
Markit commented on the result, stating that, “the German economy appears to be in the midst of a slowdown, according to February’s flash PMI results. Although the PMI is still signalling an overall expansion in economic activity, the rate of increase slowed for the second month running and was the weakest since last July. […] Looking across the two monitored sectors, it is evident that we currently have a two-speed economy. While service providers continued to record solid growth of output and new business, the slowdown in the goods-producing sector intensified, with the headline PMI just about managing to remain above the neutral 50.0 mark. That said, the latest reading was the worst since November 2014 and indicative of a near-stagnation in the sector. Our panelists commented that weak global demand acted as a drag on growth.”