DE: PMI Composite

Fri May 04 02:55:00 CDT 2018

Consensus Actual Previous
Composite - Level 55.3 54.6 55.1
Services - Level 54.1 53.0 53.9

The flash composite output index was revised down a surprisingly large 0.7 points to 54.6 in the final April data. This made for a 0.5 point loss versus the final March outturn but suggests no significant change in overall activity rates at the start of the current quarter. Even so, the latest reading was still a 19-month low.

The negative headline adjustment was wholly attributable to a 0.9 point cut in the services PMI which, at 53.0, is now put some 1.1 points short of its final March outturn and also at a 19-month trough. Growth of new business slowed for a third straight month and was amongst the weakest in the last year-and-a-half. Even so, backlogs were up again and employment saw its sharpest increase in three months. Nonetheless, business confidence fell further below the 7-year peak its recorded in February.

Inflation developments were relatively robust again. Hence, input cost inflation ticked higher to a near-7-year high while its output price counterpart reached a 3-month peak.

In contrast to its French neighbour, it is manufacturing, rather than services, that continues to underpin the German economic upswing. However, both sectors have seen a notable slowdown in growth since the end of last year and worryingly, for manufacturing the deceleration has been led by domestic demand. First quarter flash GDP, not scheduled until the middle of the month, could even struggle to match the 0.4 percent quarterly rate shown in the full Eurozone preliminary flash report. The current quarter may not be any better.

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.