Brandenburg Gate in Berlin, Germany

Germany PMI January 2021

Germany: Private-sector operating conditions improve at a softer clip in January

Operating conditions in the German private sector economy improved at the softest pace in seven months in January, with the IHS Market composite Purchasing Managers’ Index (PMI) dropping to 50.7 from 52.0 in December. However, the index remained above the neutral 50-threshold that separates expansion from contraction in business conditions.

The print was driven by strong expansion in manufacturing conditions, which only partially offset a steeper contraction in the services sector. The latter has been particularly hard hit by restrictive measures to curb the spread of the coronavirus, with the current lockdown that has been in place since mid-December being extended by another two weeks on 19 January. On the other hand, conditions in the manufacturing sector continued to expand at a strong pace at the start of the new year. Demand conditions in the goods-producing sector improved in part thanks to strong foreign demand from China and the U.S. Contrastingly, employment in the services sector grew at the strongest pace since the outbreak of the pandemic, while job creation in the manufacturing sector continued to decline, albeit at the slowest pace since June 2019. Rosier business expectations lifted labor market conditions; optimism regarding output hit its highest in nearly three years on the hopes of an easing of restrictions later in the year. Turning to prices, input price pressures intensified particularly in the manufacturing sector, partly due to growing supply chain strains. However, output prices stagnated.

Phil Smith, associate director at IHS Markit, commented:

“There were few surprises from January’s flash Germany PMI release, with the manufacturing data remaining strong but showing a slight loss of momentum, while services activity was further depressed by the lockdown measures introduced in the middle of December.”

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