Germany June flash manufacturing PMI 49.0 vs 49.0 expected ...Middle East

Key findings:

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“It looks like Germany’s manufacturing sector might finally be turning a corner. For four months in a row now, production has been ticking up. As a result, economic output in this sector grew in the first half of this year. At 49 points, the headline index is still slightly in recessionary territory, due to factors such as further job cuts, but the trend has been upward since the beginning of the year. It is also encouraging that order intakes have returned to growth, meaning that the momentum of recent months cannot be attributed solely to advance orders from the US, where many companies had stocked up on goods in anticipation of higher tariffs.

“Following the sharp slump in activity in May, the situation in the service sector is stabilizing somewhat. Business activity has declined only slightly, and companies in this sector have increased their staffing levels somewhat more than in the previous month. The fact that companies were able to implement greater price increases than in May also suggests that the sector is not doing as badly as might have been expected after the previous results.

“Changes in inventories are often seen as an indicator of economic turning points. However, the accelerated reduction in inventories should not be misinterpreted in the current context. This may be explained by the fact that some companies were surprised by the higher demand for their goods and therefore drew more heavily on their inventories. The coming months will show whether companies are becoming more confident about the emerging upturn – which is our expectation – or whether they remain cautious and continue to reduce their inventories.

“There is a decent chance Germany could finally break out of the frustrating stop-start growth pattern it’s been stuck in for the past two years – one quarter of growth followed by another of contraction. This is indicated by our nowcast, which takes into account the rise of the Composite PMI. We are confident about the second half of the year anyway, as the new federal government's initial expansionary measures could then take effect.”

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