DE: PMI Composite FLASH

Wed Dec 16 02:30:00 CST 2015

Consensus Actual Previous
Manufacturing - Level 53.0 53.0 52.6
Services - Level 55.1 55.4 55.6
Composite - Level 54.9 54.9

The German economy looks to have performed much as expected this month if the new flash PMI survey is anything to go by. At 54.9, the key composite output index was down 0.3 points from its final November level but still far enough above 50 to indicate a respectable period for economic growth.

The modest dip in the headline index was in part attributable to a gentle slowdown in services where the PMI was provisionally put at 55.4, just 0.2 points below its mid-quarter print and slightly firmer than expected. Manufacturing output (54.0 after 54.2) did the rest of the damage although at 53.0, the sector PMI was actually a tick stronger than in November and, moreover, at a 4-month high.

Aggregate new orders continued to expand robustly, albeit slightly less rapidly than last month, and growth of backlogs equalled September's 52-month high. Exports were also buoyant and employment saw its sharpest gain in four years led by a particularly large increase in services where business optimism saw its most positive reading since March.

Input costs were up but only marginally and another increase in selling prices was small enough to see inflation ease to an 11-month low.

Taken at face value the flash December findings suggest that the German economy had a decent December with growth at a reasonable rate and better balanced than in recent months. Bullish new orders also bode well for early next year. Still, while signs of rising pressure on capacity were again very apparent, inflation remains stubbornly low and a major headache 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.