DE: PMI Composite FLASH


Thu Dec 15 02:30:00 CST 2016

Consensus Actual Previous
Composite - Level 54.8 54.8 54.9
Manufacturing - Level 53.7 55.5 54.4
Services - Level 54.9 53.8 55.0

Highlights
The German economy seems to have closed out the year on a relatively robust note. December's flash PMI survey put the key composite output index at 54.8, down just a couple of ticks from November's final print but a respectable result and in line with market expectations.

The minor dip in the headline indicator was attributable to services where the flash PMI dropped 1.3 points versus its final mid-quarter outturn to a surprisingly soft 53.8, a 3-month low. By contrast, the flash manufacturing PMI beat expectations and climbed more than a point to 55.5, a 35-month peak. Within this, the output sub-index impressed at 56.8.

New business picked up steam in both sectors and aggregate backlogs were up again - and at the fastest pace since June - despite another solid increase in headcount. Manufacturers saw considerable pressure on supply chains while services remained confident about business prospects with the optimism index essentially unchanged and close to the average for the year.

Against this backdrop, inflationary pressures continued to build. Input cost inflation accelerated to a five and a half year high which in turn saw aggregate output prices hiked by the largest amount since July 2011.

The December data put the fourth quarter composite output index at its highest mark since the second quarter of 2012. They leave real GDP growth this quarter on course for something close to 0.4 percent, or double the disappointingly sluggish third quarter rate. Rising new orders also bode well for a decent start to 2017 and with inflationary pressures similarly on the rise, it looks as if the German economy could yet help to put a smile on the ECB's face next year.

Definition
The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 85 percent of the full survey sample. 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 flash estimates of the manufacturing and services PMIs. The data are produced by Markit.

Description
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.