Germany: Private-sector operating conditions improve at a stronger clip in December
December 16, 2020
Germany’s private-sector operating conditions improved at a slightly stronger pace in December, ending the year on a somewhat positive note. The IHS Markit composite Purchasing Managers’ Index (PMI) came in at 52.5 in the month, up from November’s five-month low of 51.7. Consequently, the index remained above the neutral 50-threshold that separates expansion from contraction in business conditions; however, the services sector remained stuck in contraction.
The print was driven by the strongest improvement in manufacturing conditions since February 2018. This came on the back of resilient strong output growth, little moved by lockdown measures abroad and at home. Moreover, the order book situation improved strongly in the final month of the year due to foreign demand, particularly from China. Backlogs of work rose at a record pace as a result. That said, employment in the goods-producing sector fell at a slightly quicker pace. Meanwhile, the services sector continued to suffer from to coronavirus restrictions, but the drag of the sector on the economy eased somewhat in December from the prior month. However, the drop in new business in the sector eased.
Sentiment levels remained elevated, meanwhile, likely due to the positive news on the vaccination front. Turning to prices, output prices rose modestly in December, but at a softer pace than input prices and thus masking greater inflationary pressures due to supply-chain strains and raw materials shortages.
Phil Smith, associate director at IHS Markit, commented:
“December’s ‘flash’ PMI reassuringly showed the German economy still on a relatively stable platform, at least up until the middle of the month (flash data were collected 4-15 December). “However, the impending harder lockdown threatens to put pay to some of the resilience we’ve seen so far, with more sectors set to be impacted by the new tougher virus containment measures.”
Author: Jan Lammersen, Economist