Germany July flash services PMI 52.0 vs. 53.1 expected

• Services PMI 52.0 vs. 53.1 expected and 53.1 prior.
• Manufacturing PMI 42.6 vs. 44.0 expected and 43.5 prior.
• Composite PMI 48.7 vs. 50.7 expected and 50.4 prior.

Key Findings:

• HCOB Flash Germany Composite PMI Output Index(1) at 48.7 (June: 50.4). 4-month low.
• HCOB Flash Germany Services PMI Business Activity Index(2) at 52.0 (June: 53.1). 4-month low.
• HCOB Flash Germany Manufacturing PMI Output Index(4) at 42.2 (June: 45.1). 9-month low.
• HCOB Flash Germany Manufacturing PMI(3) at 42.6 (June: 43.5). 3-month low.

Comment:

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

“This looks like a serious problem. Germany’s economy fell back into contraction territory, dragged down by a steep and
dramatic fall in manufacturing output. The hope that this sector could benefit from a better global economic climate is
vanishing into thin air. With the composite PMI now below 50, our GDP Nowcast predicts that economic output will shrink by
0.4% in the third quarter compared to the second quarter. While it is still early days and many data points are yet to come,
the second half of the year is starting on a very weak note.”

“Improvement is not in sight in the manufacturing sector as new orders fell at the quickest rate in three months. This aligns
with the accelerated declines in the backlog of orders and the volume of purchased materials. The weakness in the
manufacturing sector appears to be persistent, with a potential rebound not expected until at least the fall of this year.”

“The elephant in the room is the various structural issues. With respect to the manufacturing sector, the main structural
challenges include labour market shortages, an investment backlog in infrastructure, a lack of digitalization, and relatively
high energy prices. However, the most significant factor impacting the German manufacturing sector is the increasing loss of
global market share of German car and machinery producers to competitors in China. Unfortunately, this problem is here to
stay.”

“Germany’s economic downturn is somewhat buffered by a still-growing service sector. However, the situation there is far
from comfortable. Firms have even cut jobs, and outstanding business declined faster than in the previous month. Moreover,
it appears that the mini boom in tourism, which could be associated with the European football championships, was already
over in July as new export business in services shrank.”

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