Prior 49.0Services PMI 50.1 vs 50.0 expectedPrior 49.7Composite PMI 50.3 vs 50.7 expectedPrior 50.4
The readings for both the manufacturing and services sectors are a marginal improvement to June, but industrial output is notably seen dropping to a five-month low though. All in all, it just reaffirms marginal growth in the German economy to start Q3 as underlying demand conditions continue to stabilise. A standout from the report is that services firms are noting the first
increase in new business in almost a year. HCOB notes that:
“The economic situation in the manufacturing sector remains fragile, as underscored by the headline PMI remaining below
the 50 mark. However, the fact that production in this sector has now expanded for five months in a row is encouraging.
Given the sustained rise in export orders over the past four months, it is reasonable to anticipate a continued expansion in
output. Against this backdrop, manufacturing companies have also slowed the pace of job cuts. Overall, we see increasing
signs of a recovery in the manufacturing sector, a picture that is confirmed by the latest investment initiative by key business
leaders and supported by the measures taken by the federal government, including more favourable depreciation conditions
for investments since July 1. Even higher US tariffs should not fundamentally change this outlook.
“The service sector is no longer acting as a drag on the economy but has returned to growth, albeit at a rate that can be
described as marginal at best. After ten months of decline, new business is showing slight growth, and sentiment has
improved as companies are significantly more confident that they will have expanded their activities in twelve months’ time.
The brightening outlook is in line with our expectation that rising real wages and expansionary fiscal policy should help the
sector as a whole to regain its footing.
“Inflation has eased again in sales prices. Prices are falling in industry, as the stronger euro is leading to lower import prices
and tariff barriers in the US are also likely to support the downward trend in prices here. The disinflationary trend is
continuing in the service sector, with lower goods prices and less rapid wage growth providing tailwinds, at least temporarily.
“With the relatively favourable start to the third quarter, our GDP nowcast, which also takes the HCOB PMI indicators into
account, points to relatively solid growth, driven by both the industrial and service sectors. However, given the many
unknowns and the lack of data at this stage, this is only a very preliminary statement.”
This article was written by Justin Low at investinglive.com.