|Manufacturing - Level||51.8||51.6||52.5|
|Services - Level||54.0||55.2||54.3|
|Composite - Level||54.5||54.3|
The German economic recovery gained some additional momentum this month according to the flash PMI results. At 54.5 the composite output index provisionally stood 0.4 points above its final September reading and far enough above the 50 growth threshold to indicate a respectable month for overall business activity.
A faster expansion rate in services lay behind the headline improvement and the flash PMI here climbed more than a point versus its final September print to a 7-month high of 55.2, comfortably above market expectations. By contrast, the provisional index for manufacturing dropped a sharper than anticipated 0.9 points to 51.6, a 5-month low. Within this, the output sub-index fell 0.8 points to 53.2, also a 5-month trough.
New orders continued to rise but a decent, if smaller, overall gain masked the weakest increase in manufacturing since July. Still, aggregate backlogs were up for a third month running which, with employment growth close to a 4-year peak, suggests some build-up of capacity pressures. However, despite stronger activity, business optimism in services deteriorated sharply and touched its weakest level in a year.
Inflation developments were moderately positive. Hence, input costs were up for an eighth straight month and output prices saw a ninth consecutive increase. For the latter, the inflation rate was the highest since January.
Overall today's findings are consistent with a steady near-term growth profile for the German economy. However, the lack of balance is an issue and the slowdown in manufacturing orders a worry for output prospects around the turn of the year. The deceleration in the global economy is clearly impacting German industry. Inflation seems to be moving in the right direction but most likely not fast enough for the ECB.
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.