Latest data released by Markit/BME - 23 October 2020
The beat in the manufacturing print is helping to offset the slump in the services sector, which is weighed down by the resurgence in virus cases in the country. That sees overall business activity slow slightly but not as badly as anticipated.
But the divergence highlights the conundrum faced by the German economy, where the manufacturing sector is less impacted by the second virus wave - helped by the recovery in export demand - while the services sector momentum is fading.
Markit notes that:
"Encouragingly, the German economy is showing a degree of resilience in the face of a second wave of coronavirus cases, October's flash PMI data suggests. While some services firms in Germany have been hit by new restrictions and increased uncertainty around a 'second wave', the decline in service sector activity has so far been quite limited, whilst at the same time the country's economic performance is being buoyed by a strong showing from manufacturing.
"It's increasingly looking like a two-speed economy. Manufacturing businesses have been able to continue operating with less disruption from any new restrictions than many of their service sector counterparts, whilst at the same time reaping the benefits of a resurgence in global goods trade.
"As more manufacturers get back or close to pre COVID-19 levels of activity, however, sustaining growth is going to become more challenging. Manufacturers' expectations dipped slightly in October for the first time in seven months, though any concerns towards the outlook are mostly amongst services firms."
The euro has nudged a little higher on the headline beat, moving from 1.1804 to 1.1819, while the DAX is also now seen up by 0.8% on the session.
That said, I wouldn't get too carried away by the narrative above as tighter restrictions may yet come back to bite at the manufacturing sector recovery should the virus situation continue to worsen in the coming months.
