German manufacturing PMI rose sharply in February

Data from IHS Markit indicated a modest expansion of German private sector business activity in February, with the rate of growth little-changed from that recorded at the start of the year. Notably, the manufacturing sector moved closer to stabilisation, with survey data indicating slower falls in output, new orders and employment. This was despite reports from goods producers of a slump in both exports and sentiment, linked to the impact of the coronavirus on activity in China and the wider region.

The Flash Germany Composite Output Index - which tracks the combined change in activity across the country's manufacturing and service sectors, and is based on approximately 85% of usual monthly replies - registered 51.1, down only slightly from January's five-month high of 51.2. Growth of output was driven by the service sector, where business activity continue to rise at solid pace, albeit one that was slower than January's five-month high. The rate of decline in manufacturing production meanwhile eased for the fourth time in the past five months to the weakest since May last year. There were some reports from surveyed firms of a lack of availability of inputs weighing on output levels.

February saw the headline Flash Germany Manufacturing PMI climb from January's 45.3 to a 13-month high of 47.8. Economists had expected a decrease to 44.8. Almost half of the index's month-on month gain was attributable to a deterioration in supplier delivery times*, which panellists predominantly linked to coronavirus related disruption in China. That said, there were also slight positive influences on the headline manufacturing PMI from the output, new orders, employment and stocks of purchases components, which all exhibited slower rates of decline.