POST Online Media Lite Edition


Modest growth of German economy despite slump in exports

Christian Fernsby |
‘Flash’ PMI survey data from IHS Markit indicated a modest expansion of German private sector business activity in February, with the rate of growth little-changed from that recorded at the start of the year.

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Notably, the manufacturing sector moved closer to stabilisation, with survey data indicating slower falls in output, new orders and employment.

This was despite reports from goods producers of a slump in both exports and sentiment, linked to the impact of the coronavirus on activity in China and the wider region.

The Flash Germany Composite Output Index registered 51.1, down only slightly from January’s five-month high of 51.2.

Growth of output was driven by the service sector, where business activity continue to rise at solid pace, albeit one that was slower than January’s five-month high.

The rate of decline in manufacturing production meanwhile eased for the fourth time in the past five months to the weakest since May last year.

There were some reports from surveyed firms of a lack of availability of inputs weighing on output levels.

February saw the headline Flash Germany Manufacturing PMI climb from January’s 45.3 to a 13-month high of 47.8.

Almost half of the index’s month-on-month gain was attributable to a deterioration in supplier delivery times, which panellists predominantly linked to coronavirusrelated disruption in China.

That said, there were also slight positive influences on the headline manufacturing PMI from the output, new orders, employment and stocks of purchases components, which all exhibited slower rates of decline.

Latest data indicated signs of renewed weakness in new export orders across both manufacturing and services.

After nearing stabilisation at the start of the year, overall inflows of new business from abroad fell markedly and at the fastest rate for three months in February.

Total new orders meanwhile rose for the second month in a row, buoyed by stronger domestic demand, though the rate of growth was only modest and slower than in January.

Employment across Germany’s private sector rose marginally in February, as job creation at service providers continued to offset staff cuts in manufacturing.

That said, the pace of employment growth in the service sector was at a 21-month low.

Concerns about the impact of the coronavirus on supply chains and the health of the global economy were reflected in a drop manufacturers’ expectations for output over the next 12 months.

The degree of optimism in the goods-producing sector was down from a 17-month high in January and fell further below the level seen in services, which likewise ticked down from the previous month (albeit falling only slightly).

That said, in both cases sentiment remained well above the lows seen in the second half of last year.

On the price front, February saw average prices charged for goods and services rise at the slowest rate for three-and-a-half years.

Behind this was a combination of a moderation in service sector price inflation to a 31-month low and the deepest cuts to factory gate charges for more than ten years.

By contrast, cost pressures faced by German businesses showed further signs of picking up from the lows seen at the end of 2019.

Input price inflation ticked up for the second month running in February to the highest since June last year.

Data at the sector level showed another steep rise in service sector costs, while the rate of decline in manufacturing purchase prices was the weakest seen for eight months.