Brandenburg Gate in Berlin, Germany

Germany PMI March 2021

Germany: Private-sector operating conditions improve at over three-year strong pace in March

Germany’s private sector economy ended the first quarter of the year on a positive note, with the IHS Market composite Purchasing Managers’ Index rising to a 37-month high of 56.8 in March from 51.1 in February. Moreover, the index moved further north of the neutral 50-threshold that separates expansion from contraction in business conditions.

The headline print was driven by the steepest improvement in manufacturing business conditions on record. Rising new business in the manufacturing sector came in part on the back of strong external demand, particularly from Asia, Europe and the United States, leading to record goods export orders growth. Moreover, goods-producers struggled to keep up pace with demand as backlogs of work rose at the strongest pace on record. Consequently, job creation in the manufacturing sector grew for the first time in over two years. Meanwhile, services sector operating conditions returned to expansionary territory for the first time since September last year; however, the survey was conducted prior to the announcement on 23 March that the lockdown would be extended by three weeks. New work in the services sector fell at the softest pace in six months, but external demand remained weak and backlogs of work were reduced as a consequence. Nonetheless, employment rose slightly faster in the services sector.

Turning to prices, input costs rose at the sharpest pace in a decade amid rising commodity prices and greater transport costs. This was partly passed on to consumers, with services output prices rising for the first time in three months and factory gate prices increasing at the strongest clip since September 2002. Lastly, manufacturers remained strongly upbeat regarding the outlook for the year ahead and services providers raised their expectations for expected activity.

Phil Smith, associate director at IHS Markit, commented:

“The sustained upturn in the factory sector has seen the manufacturing PMI reach unprecedented heights, with growth in global demand for German goods showing no signs of abating and businesses reporting that previously-delayed investments are now being realised. On the flip side, however, supply chains are coming under increased pressure from the upturn in the manufacturing sector, which is pushing up factory input costs at one of the quickest rates in nearly 25 years of data collection.”

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