DE: PMI Composite FLASH

Wed Sep 23 02:30:00 CDT 2015

Consensus Actual Previous
Manufacturing - Level 52.6 52.5 53.2
Services - Level 54.5 54.3 53.6
Composite - Level 54.3 54.0

The flash PMI results suggest that the German private sector economy continued to grow this month, but at a slower rate than in August and somewhat less quickly than expected. At 54.3 the composite output index was provisionally 0.7 points short of its final August reading on the back of weaker activity rates in both manufacturing and services.

The flash manufacturing PMI was 52.5, off 0.8 points from August as output growth (54.2) dipped to a 2-month low. However, overall new orders continued to expand at a healthy clip and there was a second successive rise in exports. Backlogs and employment also made fresh ground. Even so, already very limited inflationary pressures eased with input costs declining at their steepest rate since January and output prices rising only marginally.

The flash services PMI stood at 54.3, a 0.6 point drop from August's final print. However, in line with the goods producing sector, new orders rose at a solid rate and with backlogs also posting a marked increase, headcount was up strongly. Business expectations remained positive but slipped from the 4-month high seen last month. Input costs increased but the rate of service provider inflation still decelerated slightly.

The flash September data put the average third quarter composite output index at its highest level since the third quarter of 2014. Moreover, with aggregate new orders expanding at their fastest rate in nearly two years, growth of backlogs at a 4-year high and employment still rising rapidly, the fourth quarter should impress too. That said, the actual data have tended to fall short of the survey's findings in recent months so the risks are that the economy closes out the year on a slightly less robust note than indicated here.

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.