Germany May final services PMI 54.2 vs. 53.9 expected

• Final Services PMI 54.2 vs. 53.9 expected and 53.2 prior.
• Final Composite PMI 52.4 vs. 52.2 expected and 50.6 prior.

Key findings:

• HCOB Germany Services PMI Business Activity Index at 54.2 (April: 53.2). 12-month high.
• HCOB Germany Composite PMI Output Index at 52.4 (April: 50.6). 12-month high.
• Job creation gathers pace as business optimism grows.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Things are looking up. The mood in the German service sector is improving month by month. There’s growing hope that the
German economy is not the sick man of Europe after all. In fact, Germany is no longer lagging behind other countries and
has passed this baton to France, where the service sector has slipped back into recession. Meanwhile, Germany’s service
sector has caught up with Italy’s and almost also to Spain’s, whose business activities have been rising since the beginning
of the year and last autumn, respectively. A well-performing tourism sector likely plays a crucial role in this upswing.”

“Employees continue to have good prospects. Employment has been rising steadily for five months, indicating strong
confidence among businesses. Skeptics might argue that the increased demand for workers is due to declining productivity.
For instance, if ten employees retire or leave a company, they might need to be replaced by twelve people because the new
hires are less experienced or unwilling to work overtime. While this may be true in some cases, we believe that the primary
factor is that growing business activity and improved new business can only be managed with more staff.”

“Inflationary pressure in the service sector is easing somewhat. Operating costs, significantly influenced by wages, have
increased less sharply than in the previous month. This has likely led to less substantial price increases for end consumers.
However, compared to historical levels, inflationary pressure remains above average. The positive side of this development
is that service sector companies still seem to have some pricing power, which bodes well for the economic stability of the
sector.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.