German Preliminary Manufacturing PMI contracts to 49.2 in July vs. 50.6 expected

• German Manufacturing PMI arrives at 49.2 in July vs. 50.6 expected.
• Services PMI in Germany drops to 49.2 in July vs. 51.2 expected.
• EUR/USD drops towards 1.0150 on downbeat German PMIs.

The German manufacturing and services sectors entered into contraction in July as the downturn gathered pace, the preliminary manufacturing activity report from S&P Global/BME research showed this Friday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in at 49.2 this month vs. 50.6 expected and 52.0 prior. The index slumped to 25-month lows.

Meanwhile, Services PMI dropped from 52.4 booked previously to 49.2 in July as against the 51.2 estimated. The PMI hit the lowest level in seven months.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 48.0 in July vs. 50.1 expected and June’s 51.3. The gauge reached 25-month troughs.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“Having enjoyed a growth boost from the previous easing of virus-related restrictions, a collision of various headwinds in July served to push the German economy into contraction territory for the first time in 2022 so far.”

“Ongoing supply-delays and the uncertainty caused by the war in Ukraine continued to be reported as factors weighing on company performance, but based on a reading of anecdotal evidence, inflation and the pressures these are having on budgets was a noticeable feature behind the worst performance of private sector activity since the height of the first pandemic wave in the spring of 2020. With this in mind, whilst we are seeing a downward trend in our price indices, inflation rates remain stubbornly elevated according to the July survey.”

FX implications

EUR/USD is holding the lower ground near 1.0144, down 0.81% on the day. The spot lost 40-pips in a quick reaction to the downbeat German PMIs, which lift odds of an imminent recession.