Brandenburg Gate in Berlin, Germany

Germany PMI April 2020

Germany: Private-sector business conditions deteriorate at record-steep pace due to Covid-19

Conditions in the private sector of the Euro Area’s largest economy contracted at a record-steep pace in April due to the Covid-19 lockdown, with the composite Purchasing Managers’ Index (PMI) falling to 17.1 from March’s revised 35.0 reading (previously reported: 37.2). The headline figure moved further south of the neutral 50-threshold that signals an overall decrease compared to the prior month.

The nosedive came on the back of a record decline in the services sector and the worst manufacturing PMI reading in over 11 years. The services sector has been particularly hard-hit by government measures to curtail the spread of the virus. Both sectors, moreover, suffered from a collapse in domestic and foreign demand as the world went into lockdown. Consequently, manufacturing employment decreased at the fastest pace in over a decade while jobs in the services sector were shed at a record pace. This came despite many firms reportedly making use of the short-time work scheme introduced by the government to avoid lay-offs.

Looking at prices, output prices fell at the quickest pace in over a decade, partly due to lower oil and commodity prices and a reduction in the wage bill. Expectations regarding the year ahead, meanwhile, recovered only marginally from the prior month’s record low.

Phil Smith, principal economist at IHS Markit, commented: “April’s PMI surveys reveal the full effects of the COVID-19 pandemic and subsequent lockdown on Germany’s economy, showing business activity across manufacturing and services falling at a rate unlike anything that has come before.”

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