Brandenburg Gate in Berlin, Germany

Germany PMI March 2020

Germany: Private-sector business conditions drop to multi-year low in March amid Covid-19 restrictions

The German private-sector economy contracted sharply at the end of the first quarter, with the composite Purchasing Managers’ Index (PMI) falling to an over 11-year low of 37.2 in March from 50.7 in February. The headline figure, consequently, fell markedly below the neutral 50-threshold that signals an overall decrease compared to the prior month.

The nosedive came chiefly on the back of a marked worsening of operating conditions in the services sector, with the subcomponent falling to a record low due to imposed restrictions to halt the spread of Covid-19; the manufacturing sector, meanwhile, remained in contractionary territory but recorded a less pronounced deterioration in business conditions. Nonetheless, manufacturing output and order book volumes fell sharply, with the coronavirus pandemic weighing heavily on domestic and foreign demand. Given the current dire situation of the private sector, employment contracted in the month at the steepest pace in over a decade and production expectations dropped to their lowest level in over seven years.

Looking at prices, input costs fell for the first time in nearly four years on the back of low global oil prices and reduced demand for raw materials and other inputs. Output prices, meanwhile, fell at the quickest pace in more than a decade, in a bid to support sales.

Phil Smith, principal economist at IHS Markit, commented: “The unprecedented collapse in the PMI underscores how Germany is headed for recession, and a steep one at that. The March data are indicative of GDP falling at a quarterly rate of around 2%, and the escalation of measures to contain the virus outbreak mean we should be braced for the downturn to further intensify in the second quarter.”

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