Germany: Flash PMI rises slightly in October and points to private sector expansion
October 23, 2015
Markit’s composite Purchasing Managers’ Index (PMI) inched up from September’s 54.1 to 54.5 in October. As a result, 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.
October’s increase came on the back of faster output growth at service providers, which more than offset a slower expansion at manufacturers. New orders rose in October, although the pace of growth slowed compared to September dragged down by the manufacturing sector, which recorded the smallest rise in new orders since July. According to the survey report, this slowdown likely resulted from weaker external demand, especially from Russia and China. Adding to this, the pace of job creation accelerated to an almost-four-year high in October and backlogs of work continued to rise over persistent capacity pressure. While input costs rose for the eighth consecutive month, the increase was smaller than in previous months due to low energy costs. Output charges also continued to increase and recorded the largest rise in this year.
Markit commented on the result, stating that, “October’s PMI results paint a fairly passive picture of the health of the German private sector economy at the start of the final quarter of 2015. […] However, much of the strength was attributed to the service sector, where companies enjoyed the strongest rise in business activity for seven months. Meanwhile, today’s numbers signal a note of caution for German manufacturers. Output and new orders increased at weaker rates, with some companies explicitly mentioning ongoing uncertainties stemming from the Russian sanctions. Moreover, the combination of rising stocks of finished goods levels and slower new order growth suggests that companies may scale down their production in coming months.”