Germany: Private-sector business conditions continue to improve strongly in August
Although easing from the prior month, Germany’s private-sector business conditions continued to improve strongly in August, with the IHS Markit composite Purchasing Managers’ Index (PMI) coming in at 53.7 (July: 55.3). The headline figure marked the second-highest reading in nearly two years. Moreover, the headline print remained notably above the neutral 50-threshold that signals an overall increase compared to the prior month.
The downtick in private-sector operating conditions came on the back of a notably softer increase in the services sector, due to a steeper fall in new foreign business inflows. On the other hand, service providers did report greater new domestic business demand. More positively, operating conditions in the manufacturing sector improved at a near two-year strong pace. The uptick in manufacturing business conditions was driven by greater inflows of new work, supported by greater external demand particularly from China and Turkey. Consequently, backlogs of work rose for the first time since November 2018, which was also partly due to yet another marked fall in staff numbers in the sector. Turning to prices, output prices fell fractionally on average, chiefly due to lower services prices. Meanwhile, input prices rose for the first time in six months on the back of a robust rise in operating costs in the services sector.
Phil Smith, associate director at IHS Markit, commented: “The slowdown was centred on the service sector, where growth was close to stalling amid renewed travel restrictions and a sustained decline in overall employment that continues to undermine domestic demand.”