Brandenburg Gate in Berlin, Germany

Germany PMI October 2020

Germany: Private-sector operating conditions improve at a slightly softer pace in October

Private-sector operating conditions in Germany improved at a slightly softer pace in October, with the IHS Markit composite Purchasing Managers’ Index (PMI) inching down to 54.5 from 54.7 in September. Consequently, the index remained above the neutral 50-threshold that separates expansion from contraction in business conditions.

The print reflected a contraction in the services sector’s business conditions as demand has been hit by new restrictions and increased uncertainty due to rising new coronavirus cases. New business dropped for the first time in four months on the back of a marked decline in external demand. Nonetheless, employment grew in the services sector for the fourth straight month. Business conditions in the manufacturing sector, meanwhile, improved at the quickest rate in nearly 10 years. Order book volumes surged, particularly due to a spike in foreign demand from China, the US and Europe. Backlogs of work, consequently, rose at the strongest pace in nearly three years. That said, employment decreased for the eighth-consecutive month. On the price front, the average price for goods and services rose for the first time since February due to a rise in input costs.

Phil Smith, associate director at IHS Markit, commented:

“The German economy is showing a degree of resilience in the face of a second wave of coronavirus cases [but] it’s increasingly looking like a two-speed economy. (…). As more manufacturers get back or close to pre-COVID-19 levels of activity, however, sustaining growth is going to become more challenging.”

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