DE: PMI Composite FLASH

Fri Aug 21 02:30:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 51.7 53.2 51.5
Services - Level 53.7 53.6 53.7
Composite - Level 54.0 53.4

After proving less resilient than expected in July, Germany's private sector economy shifted into a higher gear in August, with output and new orders both increasing at the sharpest rates in four months. The composite output index climbed from July's 53.7 to 54.0 in August, thereby signalling acceleration in the pace of private sector output growth. Manufacturers reported the sharpest rise in output for five months, while activity growth at service providers was little-changed from July.

Mirroring the trend for output, manufacturers signaled a stronger increase than service providers. Anecdotal evidence attributed higher new business to successful acquisitions and increased demand from both the domestic and foreign market. Goods-producers reported the sharpest rise in new export orders in one-and-a half years. Panelists noted higher demand from a range of countries, including the UK and the US.

Good news was that the rate of job creation accelerated to a 44-month high and was largely to increased business requirements. August's survey results highlighted some pressure on operating capacity in Germany's private sector, with business outstanding rising for the first time since March. The rate at which backlogs accumulated was the most marked in 19 months.

On the price front, companies reported a sixth successive monthly rise in input costs in August. However, the rate of cost inflation was the lowest in this sequence. Weaker inflation was largely a result of falling input prices in the goods-producing sector, with manufacturers commenting on lower costs for energy and certain raw materials.

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.