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December PMI ends strongest quarter in Germany since Q2 2014

Staff Writer | December 16, 2016
Growth of Germany’s private sector continued at the robust pace seen in the preceding two months during December.
Germany economy
Germany economy   Markit Flash Germany PMI
The Markit Flash Germany Composite Output Index posted 54.8, down only slightly from 55.0 in November and 55.1 in October. Together, those three readings pointed to the strongest quarter since Q2 2014 (average: 55.0).

The private sector expansion was led by manufacturers in December. Goods production rose at one of the sharpest rates since the early part of 2014. Subsequently, Germany’s overall Manufacturing PMI climbed to a near three-year high.

Stocks of purchases were raised for the first time since October 2014 in anticipation of further new business gains, while increased activity in the sector led to considerable pressure on supply chains (lead times lengthened to the greatest extent in five-and-a-half years). Whereas goods producers enjoyed marked growth in December, service providers noted a slowdown.

Activity increased to the least extent since September. Service sector optimism was nevertheless little-changed, with activity still expected to rise in 2017. German firms reported a robust rise in new work during December.

Mirroring the trend seen for output, manufacturers saw a faster increase in new orders than their service sector counterparts. New export work rose further amid reports of new contract wins in Europe, Asia and the US. With output and new business continuing to grow, the rate of job creation in Germany’s private sector remained solid.

Though easing, the latest rise was broadly in line with the 2016 average. Both sectors saw jobs growth, with anecdotal evidence highlighting improving order books and strong sales forecasts.

The rise in employment was insufficient to relieve pressure on operating capacity, however. Backlogs of work rose for the seventh straight month, and at the fastest pace since June. December data signalled mounting cost pressures at German private sector businesses.

The rate of input price inflation picked up to a five-and-a-half year high, largely driven by a substantial rise at manufacturers. Goods producers suggested that higher commodity prices (notably oil and steel) had been exacerbated by a weaker euro.


 

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