DE: PMI Composite FLASH

Thu Apr 23 02:30:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 53.0 51.9 52.4
Services - Level 55.4 54.4 55.3
Composite - Level 54.2 55.3

The German economy started the second quarter on a rather softer note than generally expected. At 54.2 the flash composite output index was still well above the 50 growth threshold but down 1.2 points versus its final March reading and the flash PMIs for both manufacturing (51.9) and services (54.4) declined versus their respective final quarter-end readings.

That said, overall economic activity still expanded at its second fastest rate since last September and, outside of March, aggregate new orders grew at their strongest pace in eight months. Moreover, the bulk of the rise in new business was attributable to a stronger domestic market. Backlogs were broadly flat but employment edged higher and optimism about the year ahead in services remained elevated, albeit at a four month low.

Input costs were up for a second month in a row and, importantly, rises here were passed on in output prices where inflation posted its strongest rate since January 2014.

Today's results suggest that the German economy cooled slightly at the start of the current quarter. However, in general growth appears to have been respectable enough and rising new orders, particularly at home, should support output over the rest of the period. The ECB should not be too unhappy with April's preliminary findings.

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.