Germany July final services PMI 52.5 vs. 52.0 prelim

• Final Services PMI 52.5 vs. 52.0 prelim and 53.1 prior.
• Final Composite PMI 49.1 vs. 48.7 prelim and 50.4 prior.

Key findings:

• HCOB Germany Services PMI Business Activity Index at 52.5 (Jun: 53.1). 4-month low.
• HCOB Germany Composite PMI Output Index at 49.1 (Jun: 50.4). 4-month low.
• Output prices rise at slowest rate since April 2021.

Comment:

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

“If one were to go by the newspaper headlines, one would have to conclude that the concerts of Taylor Swift and her fans,
the Swifties, have supported services activity in Germany. Even with the concerts, however, the growth pace has actually
slowed down for the second month in a row, due to the weakening of consumer services, among other sectors. The Finance
sector and Information & Communication did better, holding up activity in growth territory. Overall, service providers aren’t
propping up the economy as much as they used to earlier in the year, at a time when the manufacturing sector is tanking
even more.”

“Service providers’ profit margins are getting squeezed. Production costs are going up a bit faster than last month, but
companies are finding it even harder to pass those costs onto customers. Because of this, among other reasons, they are
trying to save on labour costs and have cut jobs for the first time since the end of 2023.”

“Growth could keep slowing down in the next few months. New business only grew a little in July, and outstanding business
has been dropping almost continuously since mid-2023. If the service sector stalls, the whole economy could slip into a
recession because manufacturing continues to shrink sharply. Sadly, a recession (technically defined as two straight
quarters of negative growth) is not just a distant possibility anymore, given that the economy contracted in the second
quarter.”

“Even with the current economic slowdown, service providers aren’t feeling hopeless. In fact, companies are more confident
than they were in June about expanding their activities in a year. Some are finding hope in new tech developments and plan
to explore new markets. We’re also pretty sure that new technologies – especially Artificial Intelligence – will give growth a
positive boost.”

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