German business activity growth remains subdued in January
Staff Writer |
Business activity growth across Germany’s private sector recovered slightly in January, though was still among the weakest seen over the past four years, according to IHS Markit.
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Meanwhile, the survey’s measures of new orders and job creation worsened, with inflows of new business shown to have declined for the first time in over four years and employment growth easing to the slowest since December 2016.
On the price front, latest data showed a further softening of underlying cost pressures, with input price inflation pulling back to a 17-month low.
Having slumped to a 66-month low of 51.6 in December, the IHS Markit Flash Germany Composite Output Index recovered slightly in January to register a reading of 52.1.
Nevertheless, the implied rate of growth was still the second slowest since December 2014.
The modest uptick in the index at the start of the year was led by a solid and accelerated expansion in service sector business activity.
Manufacturing output, on the other hand, barely rose, with the rate of growth being the slowest recorded since the current sequence of expansion began more than five-anda-half years ago.
Notably, January’s survey data showed a decrease in overall inflows of new business – the first such decline since December 2014.
This mainly reflected a deepening downturn in manufacturing order books, which contracted for the fourth successive month and at the quickest rate for over six years.
Continued weakness across the autos industry, lower demand in overseas markets (particularly China) and heightened uncertainty were all highlighted as factors.
New export orders fell at an accelerated rate across both monitored sectors during the month.
In the case of services, this partially offset increased domestic market demand and resulted in the slowest overall rise in new business in the sector since June 2015.
The slowdown in inflows of new work in January was reflected in a further decrease in outstanding business, the third in as many months.
The rate at which backlogs were depleted was unchanged from the solid pace recorded in the previous survey period.
With pressure on business capacity continuing to soften, January saw a further slowdown in the rate of job creation to the weakest seen for over two years.
That said, the pace of employment growth was still comfortably above its long-run average (since 1998) as both service providers and manufacturers added to their payroll numbers during the month.
Business confidence towards the year-ahead outlook for activity remained relatively subdued in January.
Though improving slightly since December, driven by stronger expectations among services firms, the degree of optimism was still the second-lowest seen over the past four years.
The rate of input cost inflation across Germany’s private sector eased to its weakest for almost oneand-a-half years in January.
Though service providers reported a steeper rise in operating expenses during the month, linked in part to increased toll charges and wage pressures, this was more than offset by a slowdown in manufacturing purchase price inflation to a 27- month low.
Here, there were reports of lower oil and steel prices weighing on overall cost increases.
Average prices charges for goods and services meanwhile increased at a marked rate that was the quickest since last October.
Rates of inflation were broadly similar across both monitored sectors.
Finally, January saw the IHS Markit Flash Germany Manufacturing PMI slip below the 50.0 ‘no-change’ mark to 49.9, indicating the first (albeit only fractional) deterioration in overall business conditions in the sector since November 2014.
The slippage since December (51.5) reflected not only weaker trends in output and new orders but a considerable moderation in supply chain pressures.
The increase in input lead times in January was the least marked since July 2016. ■