Germany manufacturing continues to weigh on private sector output - IHS Markit

According to the report from IHS Markit, business activity in Germany remained subdued in December, with growth across the service sector continuing to be offset by a downturn in manufacturing. Confidence towards the outlook improved, but sustained weakness in new orders continued to curb firms’ willingness to take on new staff. On the price front, the survey showed average charges for goods and services rising at the slowest rate for over three years, which reflected both soft demand and muted underlying cost pressures.

The Flash Germany Composite Output Index – which is based on approximately 85% of usual monthly replies – was unchanged at 49.4 in December amid divergent trends at the sector level. Though remaining only modest, growth of service sector business activity ticked up for the third month in a row to the highest since August. By contrast, manufacturing output posted a faster decline, which helped drag down the headline Manufacturing PMI from November’s five-month high of 44.1 to 43.4.

Commenting on the flash PMI data, Phil Smith, Principal Economist at IHS Markit said: “With the headline composite PMI holding steady at 49.4 in December, the flash data point to a weak end to a difficult year for the German economy. Manufacturing continues to weigh heavily on private sector output, with faster decreases in factory production and employment in December causing the manufacturing PMI to tick down for the first time in three months. Easing rates of decline in new orders and exports continue to provide glimmers of hope, however. The service sector remains resilient, with business activity rising at a stronger pace and business confidence perking up as well, though weak labour market trends are likely to be a restricting factor for the sector as we head into the new year.”