Market news

23 June 2020

Germany PMI points to increasing signs of life in economy - IHS Markit

According to the report from IHS Markit, June’s flash PMI data pointed to further signs of a turnaround in the German economy following a record downturn in activity earlier in the second quarter. 

At 45.8, the headline Germany Composite Output Index was up sharply from May’s 32.3 and the highest in four months, with the survey highlighting the effects of easing lockdown restrictions and also indicating an improvement in business confidence.

Latest data showed business activity edging closer to stabilisation, down to the smallest extent by far since start of the coronavirus disease 2019 (COVID19) outbreak in March. Results at the sector level showed identical rates of decline in services business activity and manufacturing production. Where activity fell since May, there were reports of coronavirus-related uncertainty continuing to weigh on demand and leading to contract postponements or cancellations. That said, there were growing reports of businesses resuming operations, with some firms also noting pent-up demand. As such, the latest decline in new orders was the shallowest in the current four month sequence. New export business also showed signs of steadying, though the rate of decline remained faster than that of total new orders. 

Business expectations turned positive for the first time in four months in June. The improvement reflected renewed optimism in both monitored  sectors, with service providers slightly more positive about the outlook than their manufacturing counterparts. That said, in both cases sentiment remained subdued by historical standards.

Lastly, June saw the Flash Germany Manufacturing PMI register a three-month high of 44.6, up from May’s 36.6 and representing a sustained recovery from an 11-year low in April. There was upward pressure on the index from slower falls in new orders, output and employment. However, its rise was stymied by a faster drop in stocks of purchases and – more notably – a stabilisation of supplier delivery times, following the recent COVID-19-related supply chain disruption.

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