ConsensusConsensus RangeActualPrevious
Composite Index51.251.1 to 51.550.951.0
Manufacturing Index47.047.0 to 48.048.346.1
Services Index51.551.0 to 52.050.252.2

Highlights

Germany's economic momentum ticked higher in March 2025 as manufacturing's drag on growth lessened and services maintained expansion. The flash Germany composite PMI rose to 50.9, a 10-month high, signalling a third consecutive month of private sector growth.

While the services sector also saw growth, at 50.2 it is 1.3 points less than the consensus and 0.9 points less than February's final. This suggests its growth pace slowed slightly. At the same time, manufacturing showed signs of recovery, with its PMI climbing to 48.3, 1.3 points above the consensus and the highest in 31 months. Factory demand conditions recovered, with new orders rising for the first time since March 2022 but export businesses remained slightly contracted as seen in February. Conversely services saw the steepest decline in new orders in a year. This is likely due to lack of certainty and client confidence.

Labour market trends divergedservices firms expanded their workforce again, but manufacturing job cuts deepened, leading to a modest employment decline. Meanwhile, input cost inflation eased, particularly in the service sector where input costs and prices charges increased the slowest in five months.

Due to these improvements, business confidence rose, with growth expectations rising in both sectors particularly in manufacturing. While manufacturing's downturn is softening, and services remain resilient, the economic recovery remains fragile, dependent on sustained demand and price stability in the coming months. The latest update leaves the German RPI at minus 17 and the RPI-P at minus 14, meaning that economic activity in general is falling short of market expectations.

Market Consensus Before Announcement

A modest improvement is seen across the board with manufacturing flash still in contraction at 47.0, services outperforming at 51.5 and composite at 51.2.

Definition

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity 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 covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced by S&P Global.

Description

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.
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