DE: PMI Composite

Thu Apr 05 02:55:00 CDT 2018

Consensus Actual Previous
Composite - Level 55.4 55.1 57.6
Services - Level 54.2 53.9 55.3

The slowdown in March business activity looks to have been rather sharper than originally thought. The final composite output index weighed at 55.1, down 0.3 points from its flash estimate and a full 2.5 points short of its final February level. This was the weakest outturn in eight months.

The negative headline revision mainly reflected a weaker adjusted services PMI which, at 53.9 in the final report, was 0.3 points below its flash reading and 1.4 points beneath its final mid-quarter print. As previously indicated, growth of new orders and employment declined versus February but remained firm enough to ensure that business confidence in the year ahead was still elevated. Indeed, optimism was only just short of February's 7-year high.

Meantime, inflationary pressures eased somewhat. However, while output price inflation decelerated, it remained firm as input costs saw another significant increase on the back of higher salaries.

The final March data would seem to confirm a marked deceleration in German business activity during the first quarter. The period as a whole should still see respectable growth but the starting point for the second quarter looks unlikely to be as robust as many might have previously assumed. Rising salaries still argue in favour of higher inflation down the road but, should the economy lose significant momentum over coming quarters, its boost to the overall Eurozone rate may fall short of ECB hopes.

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.