DE: PMI Composite

Fri Nov 04 03:55:00 CDT 2016

Consensus Actual Previous
Composite - Level 55.1 55.1 52.8
Services - Level 54.1 54.2 50.9

October was a good month for German business activity. The final composite output index weighed in at 55.1, unchanged from its flash estimate and a sizeable 2.3 points above its final September mark. It was also a 3-month high.

The flash services PMI was revised just a tick firmer to 54.2. This put the index fully 3.3 points above its final September print and similarly at its highest level since July. The recovery here was led by a bounce in new orders which saw their sharpest gain since April. Backlogs were down slightly but only as a result of a strong increase in sector headcount. Employment gains reflected an increase in business optimism to its best level in six months.

Inflation news also remained generally positive. Hence, input cost inflation crept up to a 3-month peak and, more significantly, service provider charges rose for a twenty-first straight month.

The German private sector picked up significant momentum last month after a disappointingly sluggish September. Moreover, with new business accelerating nicely too, prospects for fourth quarter GDP would seem to be shaping up well. The ECB will also be relieved to see inflation finally starting to show signs of moving in the right direction.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by Markit.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.