DE: PMI Composite FLASH

Tue Jun 23 02:30:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 51.5 51.9 51.4
Services - Level 53.0 54.2 52.9
Composite - Level 54.0 52.8

The German economic recovery picked up surprising steam in June if the latest flash PMI findings are anything to go by. At 54.0 the composite output index was 1.4 points above its mid-quarter print reflecting stronger than expected performances by both manufacturing and services.

The flash manufacturing PMI stood at 51.9, up from its final 51.1 in May, while its services counterpart gained 1.2 points to 54.2, a 3-month high. Moreover, the manufacturing output sub-index rose a tidy 1.6 points to 53.5.

However, the positive picture painted by the headline statistics was tainted by a slowdown in new business which expanded at its weakest rate so far this year, largely due to some cooling in demand for services. Indeed, overall backlogs were down for a third straight month, albeit only marginally, and employment growth, while still positive, also dipped versus its May pace. Business expectations in services were a little firmer than last time but remained below the average for the year to date.

Still, inflation developments were mildly positive. Hence, input costs were up for a fourth consecutive month and output prices similarly edged higher, although the yearly inflation rate for the latter also slid to a 3-month low.

Accordingly today's results are decidedly mixed. Taken at face value, decent output growth now would appear to presage a slowdown next quarter and a renewed dip in inflation could be in the pipeline. The ECB should not be displeased with these provisional findings but nor will it be satisfied.

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.