Germany: Private sector activity growth continues to ease in May, with the PMI hitting a 20-month low
May 23, 2018
Two months into the second quarter, data suggests that economic momentum remains mild. The composite Purchasing Managers’ Index (PMI) moderated for the fourth month in a row in May, reaching a 20-month low of 53.1, down from the prior month’s revised 54.6 (previously reported: 55.3). However, the PMI—the result of a survey of over 1,000 manufacturing and services businesses across the country—remained well above the critical 50-point mark that separates expansion from contraction in Germany’s private sector.
The reading reflected the slowest pace of expansion in business activity in over one and a half years, with activity in both the service sector and manufacturing sector moderating: Growth in new orders eased in both sectors, with the strongest softening witnessed in the service sector. Moreover, growth in new export orders also weakened amid a strong euro and the backdrop of U.S.-EU trade tensions; in 2017, the U.S. was Germany’s biggest export market. Although employment increased in the private sector, this did not prevent an increase in backlogs of work. In terms of prices, input cost inflation reached the second-strongest level in over seven years due to a pick-up in oil prices. Subsequently, output prices rose, albeit by less than the rise in input prices. On a less positive note, sentiment among businesses eased to its lowest level in a year and a half on the back of less rosy output expectations for the 12 months ahead.
Germany GDP Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 3.6% in 2018, which is down 0.3 percentage points from last month’s forecast. For 2019, panelists expect fixed investment to grow 3.4%.
Author: Jan Lammersen, Economist