Germany: Private-sector operating conditions improve at a stronger clip in February
February 19, 2021
Business conditions in the German private sector economy improved at a stronger pace in February, with the HIS Market Composite Purchasing Managers’ Index rising to 51.3 from 50.8 in January, which has marked a seven-month low. Moreover, the index moved further above the neutral 50-threshold that separates expansion from contraction in business conditions as the February print beat market expectations of a softer expansion.
However, the improvement in the headline figure masked the ongoing divergence in the German economy due to the global health crisis and related containment measures. Business conditions in the services sector contracted at the fastest pace since May last year. This came in part on the back of falling inflows of new business amid client hesitation, forced closures and travel restrictions. That said, employment in services sector rose for the eight-month running. Turning to the manufacturing sector, output strengthened as new orders remained robust on the back of a three-year strong uptick in export orders. Job creation in the goods-producing sector neared stabilization following two years of contraction.
Looking at prices, output prices rose at the fastest clip since August 2019 due to stronger price pressures in the manufacturing sector amid a near-decade sharp increase in input costs as raw material and component, and transportation prices increased. Finally, expectations regarding activity in the year ahead improved steadily to an over three-year high.
Phil Smith, associate director at IHS Markit, commented:
“February’s flash PMI results point to ongoing resilience in the German economy midway through the opening quarter, despite the country remaining under strict lockdown measures.”
Author: Jan Lammersen, Economist