- Prior 47.0
- Services PMI 53.3 vs 52.5 expected
- Prior 52.7
- Composite PMI 52.5 vs 51.6 expected
- Prior 51.3
- Full report here
Key Points:
- Business activity growth quickens in January, but labour market conditions deteriorate
Comment:
Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“The data show a good start to the new year, overall. Output in the manufacturing sector returned to - albeit meagre - growth, and so did new orders. Even more encouraging is the stronger pickup in activity in the services sector. Looking ahead, confidence has risen noticeably in the services sector and has held at a solid level in manufacturing.
“While there are signs of a modest recovery, services companies have trimmed their workforce significantly in January, which might point more to efficiency measures than to concerns about demand. In manufacturing, the process of cutting jobs has continued unabated. Since this has been ongoing since mid-2023, there’s now a lot of debate about whether this is a structural issue, one that would require structural answers in the form of reforms that are anything but easy to implement.
“In the services sector, the situation has brightened quite a bit. Pricing power seems to have increased significantly as sales price inflation has moved up. While that partly reflects higher input costs, the rise in sales price inflation has been even stronger. With new business growing more robustly than last month, service providers are becoming more self-confident – something that also shows up in their much higher optimism for future activity.
“Meanwhile, the International Monetary Fund has upgraded its 2026 GDP growth forecast for Germany by 0.2 percentage points to 1.1%, reinforcing the sense that growth prospects are improving. Still, the recovery remains rather fragile. The continued drop in inventories and another decline in backlogs of orders in manufacturing are clear examples. Yet, the unusually large fiscal stimulus through much higher spending on defence and infrastructure should provide a noticeable boost to the economy.”
