Brandenburg Gate in Berlin, Germany

Germany PMI January 2022

Germany: Private sector operating conditions improve at a strong pace in January

The IHS Markit Composite Purchasing Managers’ Index (PMI) jumped to 54.3 in January from December’s 18-month low of 49.9. The index therefore moved well above the neutral 50-threshold that separates improving from deteriorating business conditions over the prior month, signaling that Germany’s private sector got off to a strong start in the new year after the slowdown at the end of 2021.

The headline improvement was driven by firming activity in the manufacturing sector, while services-sector activity also picked up. Within the manufacturing sector, production increased at the fastest rate in five months, thanks to new orders increasing at the strongest pace since September last year. Job creation recorded a six-month high, as firms sought to increase capacity. Looking at the services sector, activity recovered somewhat from the resurgence of Covid-19 and associated containment measures at the close of last year. New business increased modestly in the month, chiefly on the back of strengthening domestic demand as new export orders fell again. Turning to prices, input inflation rose marginally on the back of higher prices for energy, fuel and materials, as well as a higher wage bill. Consequently, output price inflation was the second-quickest on record as firms sought to pass on the burden to customers.

Commenting on December’s reading, Phil Smith, economics associate director at IHS Markit, said:

“January’s flash PMI numbers came in comfortably above consensus to show a surprisingly resilient performance from the German economy at the start of the year, buoyed in particular by strong factory output growth. […] The data mark a positive start to the year and go some way to allaying fears about Omicron’s impact on the German economy in the first quarter.”

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