Business activity across Germany’s private sector continued to grow at a moderate pace in May, according to the latest PMI data from IHS Markit.
Article continues below
>
The IHS Markit Flash Germany Composite Output Index registered a reading of 52.4, up slightly from 52.2 in April and its highest since February.
Other indicators weakened, however, with new orders falling for the fourth time in five months and employment growth easing to its lowest in just over three years in April.
On the price front, latest data showed a slowdown in the rates of both input cost and output charge inflation.
The moderate rise in business activity in May was once again driven by the service sector, where output continued to rise at a relatively robust pace, albeit one that was the slowest in four months.
Manufacturing output fell for the fourth month in a row, though the rate of decline slowed for the second month running and was the weakest since February.
Despite goods production falling at a slower rate, May saw the headline IHS Markit Flash Germany Manufacturing PMI tick down slightly from 44.4 in April to 44.3, owing to negative influences from the employment, stocks of purchases and supplier delivery times components.
Next to March’s recent low, the latest PMI reading was the secondweakest in nearly seven years.
Turning to new orders, latest data showed a return to contraction following a brief uptick at the start of the second quarter.
By sector, data signalled a slower increase of new business at service providers – the least marked since February – and a further notable (albeit slower) fall in manufacturing order books, which anecdotal evidence largely linked to lower demand across the car industry and the effects of customer destocking.
Though remaining sharp overall, the rate of decline in manufacturing export sales eased for the second month running to the slowest since January.
The survey showed a seventh straight monthly decrease in backlogs of work in May.
This continued to reflect the softening of capacity pressures across the manufacturing sector, where data showed a third straight monthly decrease in employment.
Moreover, the rate of job losses at good producers gathered pace to reach the quickest since January 2013.
With workforce growth also easing in the service sector (albeit remaining strong overall), May’s increase in total employment was the weakest since April 2016.
The recent slowdown in input price inflation resumed in May, with latest data showing the softest rise in business operating expenses for over twoand-a-half years.
Driving this was a fall in manufacturing purchase prices – the first since June 2016.
Service providers, by contrast, recorded another marked rise in costs, linked in large part to wage pressures.
The rate of output price inflation likewise eased in May, moderating to its weakest since July 2017.
Factory gate prices rose at a modest pace that was close to April’s 29-month low, while charges levied by service providers rose markedly by historical standards, but at the slowest rate for 12 months.
Finally, latest data showed a further weakening of firms’ year-ahead output expectations to a 55- month low.
Contrasting with the trend in recent months, however, the decrease in optimism in May was driven by the service sector, where confidence eased to its weakest in over three-and-a-half years.
Manufacturers remained downbeat about the outlook, though they were the least pessimistic since January. ■