Germany's February PMI: Economic Growth Rebounds as Manufacturing Drag Eases

Data Interpretation

Summary:

HCOB Flash Germany Composite PMI Output Index at 51.0 (Jan: 50.5), 9-month high. HCOB Flash Germany Manufacturing PMI at 46.1 (Jan: 45.0), 24-month high. HCOB Flash Germany Services PMI Business Activity Index at 52.2 (Jan: 52.5), 2-month low.

On February 21, S&P Global released the HCOB PMI report for Germany in February:

HCOB Flash Germany Manufacturing PMI at 46.1 (Jan: 45.0), 24-month high.

HCOB Flash Germany Services PMI Business Activity Index at 52.2 (Jan: 52.5), 2-month low.

HCOB Flash Germany Composite PMI Output Index at 51.0 (Jan: 50.5), 9-month high.

Data Highlights: Business activity in Germany's private sector accelerated in February, with the Composite PMI index rising to a nine-month high, signaling a stronger recovery in economic growth. The Services sector expanded for the third consecutive month, supporting overall economic growth, albeit at a slightly slower pace. Although the Manufacturing sector remained in contraction, its drag on the overall economy eased, with the decline in manufacturing output being the smallest since May of the previous year.

New Orders: Underlying demand for goods and services showed signs of stabilising at the midway point in the first quarter, with total new business recording only a modest decrease that was the weakest in the current nine-month sequence of contraction. It was a similar story for new export business, which recorded the softest rate of contraction since last May. This reflects a modest improvement in overseas market demand. Meanwhile, capacity utilization rates fell, and the backlog of orders continued to decrease, indicating that firms were still working through existing orders.

Employment: Employment in the eurozone's largest economy meanwhile showed a modest fall as job losses in the goods-producing sector offset rising workforce numbers at services firms. Services firms nevertheless reported a rise in workforce numbers for the second month running in February. However, the latest increase was only modest and offset by deeper job cuts in the manufacturing sector, leading overall employment to decrease at a slightly faster rate than in January.

Inflation: Rates of inflation in both input costs and output prices ticked down slightly from the recent highs seen in January. While the services sector continued to face higher input prices due to rising labor costs, the manufacturing sector saw a faster decline in input costs. Overall, firms maintained a strong ability to pass on costs to customers, with the sales price increase in the services sector reaching its highest level in a year.

Outlook: Looking ahead, businesses' growth expectations for the forthcoming year were revised down in February, after having hit an eight-month high in January. Despite some easing in the manufacturing sector, concerns about potential tariffs from the US and global geopolitical uncertainties continued to weigh on business sentiment.

Overall, Germany's February PMI data indicated a stronger economic growth momentum, with the manufacturing sector's downward pressure easing and the services sector maintaining robust growth. However, the weakness in the labor market and a decline in business confidence remain areas of concern. The future stability of the economy will depend on policy adjustments and changes in the global economic environment.

Germany's February PMI

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Germany's February PMI: Economic Growth Rebounds as Manufacturing Drag Eases

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