DE: PMI Composite FLASH

Tue Mar 24 03:30:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 51.5 52.4 50.9
Services - Level 55.0 55.3 55.5
Composite - Level 55.3 54.3

March was a good month for the German economy if the latest PMI findings are anything to go by. At 55.3, the flash composite output index was up 1.5 points versus its final February mark and at its highest level in eight months.

Growth was dominated by services but manufacturing also picked up some momentum. Hence, while the flash services PMI rose 0.6 points to a stronger than expected 55.3, a 6-month peak, manufacturing posted a 1.3 point increase to 52.4, also above forecasts and its best reading in eight months.

Within manufacturing the output sub-index jumped an impressive 3.2 points to 55.4, an 11-month high as new orders growth accelerated in both sectors. Backlogs also rose in goods producing industries but saw a small decline in services. Total employment expanded at a slightly slower rate than in mid-quarter as limited gains in manufacturing helped to mask another solid advance in services where business expectations also turned more positive.

Meantime, following three successive declines, aggregate input costs rose on the back of a weaker euro and the lagged effects of the introduction of a national minimum wage at the start of the year. As a result, output prices crept higher in both sectors for a second month running.

The March PMI results are promising and while real GDP growth is unlikely to match the 0.7 percent quarterly rate achieved in October-December, a respectable performance looks all the more likely now. The pick-up in output prices is also good news but needs to become more firmly entrenched to be of any significant consequence for Eurozone policy.

The Germany PMI (Purchasing Managers' Index) is produced by Markit and is based on original survey data collected from a representative panel of 1000 companies based in the German manufacturing and service sectors. The flash estimate is based on around 85 percent of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.