DE: PMI Composite FLASH

Mon Apr 23 02:30:00 CDT 2018

Consensus Actual Previous
Manufacturing - Level 57.6 58.1 58.4
Services - Level 53.9 54.1 54.2
Composite - Level 55.3 55.4

April saw only a marginal pick-up in economic growth if the new PMI survey is to be believed. At 55.3, the flash composite output index was just 0.2 points above its final March outturn and still 2.5 points short of its February mark.

What improvement there was came via the services sector where the flash PMI edged a couple of ticks firmer versus its final March reading to a higher than expected 54.1. By contrast, its manufacturing counterpart slipped 0.1 points to 58.1 which, while stronger than expected, constituted a 9-month low.

Ominously, aggregate new business saw its weakest expansion in more than a year-and-a-half with both sectors experiencing a slowdown. Employment growth rebounded from March's 7-month trough to its fastest pace since January but business confidence fell again as another deterioration in services more than offset a marginal firming in manufacturing.

Input costs continued to rise on the back of higher salaries and commodity prices but the rate of inflation declined for a third straight month and to its lowest level since last September. Still, output prices rose solidly again and the rate of inflation here was unchanged. Delivery times increased significantly once more.

All in all, the April results suggest that the German economy began the current quarter on a relatively solid footing. However, slowing orders growth and deteriorating business confidence warn that there has been some loss of momentum and second quarter GDP growth will probably struggle to match its first quarter rate.

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.

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.