DE: PMI Composite

January 4, 2017 02:55 CST

Consensus Actual Previous
Composite - Level 54.8 55.2 55.0
Services - Level 53.8 54.3 55.1

Business activity in Germany closed 2016 at its highest mark in five months. At 55.2, the final composite output index was up 0.4 points versus its flash estimate and 0.2 points higher than its final November outturn.

The revision was largely due to a stronger services sector where the flash PMI was revised 0.5 points firmer to 54.3. That said, the reading here, while reasonably robust, was still 0.8 points short of its final level in mid-quarter. New orders growth eased slightly from November but remained solid and outstanding business continued to inch higher. As a result, job creation again impressed at a rate broadly in line with the 2016 average. Optimism about the year ahead stayed upbeat.

Inflation news was positive. Input cost inflation recorded one of its strongest rates in almost five years as rising salaries compounded higher fuel charges. In turn, this saw firms increase their average selling prices more quickly than in any month since April 2011. Higher taxes were also a feature here but strengthening underlying demand was a key factor facilitation the hike.

Despite the slowdown in service sector activity, the German economy closed out last year with decent momentum and a high enough stock of new business to point to a robust start to 2017. Increasingly, the signs are that capacity is being stretched and underlying pressure on consumer prices looks set to become more apparent over the coming months and quarters. This will sit very well with the ECB.

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.