- Before 41.9
- Services PMI 53.3 versus 50.5 expected
- Before 50.1
- Composite PMI 50.5 versus 48.5 expected
- Before 47.7
That’s a big hit to services figures and pushes the German economy into expansion territory this month. The Euro has been climbing higher, with EUR/USD currently rising from 1.0665 to 1.0695. On the contrary, it at least gives the ECB some room to maneuver if it decides not to move in June. The HCOB notes that:
“Is the recession over? That’s the obvious question as Germany’s composite PMI rose above 50 in April for the first time since the middle of last year. The answer is not simple. To begin with, it appears that the recession was primarily concentrated in the manufacturing sector, while the economy as a whole may have narrowly avoided such a downturn. Second, the overall PMI for the manufacturing sector indicates no significant change in this regard, although output is contracting at a somewhat slower pace. Finally, and perhaps most crucially, the services sector begins the second quarter on solid footing. Including PMI figures in our GDP nowcast, we estimate that GDP could grow by 0.2% in the second quarter, following an estimated growth of 0.1% in the first quarter, in both cases compared to the preceding three-month period.
“The services sector can serve as a catalyst for the overall economy. Representing around two-thirds of the economy, service companies are providing clear indications of a stronger recovery. In addition to the accelerated growth of the service activity, there are encouraging signs in the more prospective aspect of the current activity, which has moved towards an area of expansion. Furthermore, the acceleration in the pace of hiring in companies compared to March is a new indication of optimism.
“Service companies show great self-confidence. This is reflected, among other factors, in their pricing strategies. This indicates that they believe they can pass on the recent rise in input prices to their customers to a greater extent than before. This contrasts with companies in the manufacturing sector, where sales prices remain under pressure. On the input side, some companies are obviously struggling with the impact of rising oil prices. However, the overall downward trend in manufacturing input prices that has persisted since the start of 2023 remains intact.
“In manufacturing, there are some good signs, but also some bad signs. April production saw a less pronounced decline than March and we see a little more optimism about future production. However, the more pronounced drop in new orders, the sharpest in the last five months, is less encouraging. Additionally, faster delivery times provide further evidence of weakening demand. In this context, there is still no indication that the timid reversal observed in the global inventory cycle has reached Germany.
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