- Prior 40.6
- Services PMI 52.0 vs 53.1 expected
- Prior 54.1
- Composite PMI 48.8 vs 50.3 expected
- Prior 50.6
Ugh, that's a really ugly headline reading as the manufacturing sector contracts sharply with the PMI reading falling below 40(!). The services sector is at least helping to offset that somewhat but also missed on estimates in July. That sees the German economy fall into contraction territory to start Q3. The euro is falling further here alongside regional bond yields. HCOB notes that:
"This is a bad start to the third quarter for Germany’s economy, with the flash PMI dropping into contraction territory. The downturn continues to be led by the manufacturing sector, while the slowdown in services sector growth that started last month has extended into July.
“There is an increased probability that the economy will be in recession in the second half of the year. This is because our GDP nowcast for the third quarter, which considers these latest HCOB PMI figures, points to negative growth.
“Over the last few months, we have seen a jaw dropping fall in both new orders and backlogs of work, which are now declining at their fastest rates since the initial Covid wave at the start of 2020. This doesn’t bode well for the rest of the year.
“Manufacturers are reacting to the drop in activity and new orders by starting to trim their workforces for the first time since January 2021. Meanwhile, in the services sector hiring has eased up significantly. The uptick in the unemployment rate, which we have seen over the last few months, is therefore likely to continue.
“Hopes for a rapid slowdown in inflation have taken a hit with these latest findings, given that the surge of input and output prices in the vast services sector has even gathered some pace in July."
