DE: PMI Composite

Wed Oct 04 02:55:00 CDT 2017

Consensus Actual Previous
Composite - Level 57.8 57.7 55.8
Services - Level 55.6 55.6 53.5

The final PMI results left intact a robust picture of German economic activity last month. The flash composite output index was unrevised at 57.7, a healthy 1.9 point gain versus its final August reading and a 77-month high.

The final services PMI weighed in at 55.6, also matching its preliminary estimate and constituting a solid 2.3 point bounce versus its relatively sluggish final outturn in mid-quarter. This was its best reading in half a year.

Today's report confirmed a sharp rebound in new business from July's 10-month low and orders growth touched its fastest rate in 6-months. Backlogs also rose following a slight drop last time and the advance here was the largest since March. Strong demand ensured a forty-seventh straight monthly increase in employment and the rate of job creation was slightly faster than in August. Business confidence in the year ahead climbed to a 4-month high having dropped to a 8-month low last time.

Meantime, inflationary pressures remained elevated. Hence, input cost inflation held comfortably above its historic norm reflecting higher prices for salaries, fuel and rent. The rate of inflation of output prices eased slightly over the month but was again also solid.

The results point to plenty of momentum in the German private sector economy entering the current quarter and real GDP growth looks set to hold at a very respectable rate through year-end. Having lagged manufacturing, the improvement in services is particularly welcome and suggests that the recovery is now better balanced which bodes well for its longer-term sustainability.

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.