Latest data released by Markit/BME - 19 February 2021

  • Prior 57.1
  • Services PMI 45.9 vs 46.5 expected
  • Prior 46.7
  • Composite PMI 51.3 vs 50.5 expected
  • Prior 50.8

A contrast in narratives in Germany as the manufacturing print comes in at a three-year high while the services print sinks to a nine-month low as tighter virus restrictions weigh on the latter for the most part.

Stronger manufacturing output contributed to the jump in the headline reading but just take note that record delivery delays also played a role in skewing the index higher.

That said, as much as there is skepticism surrounding overall economic conditions in general, the readings here will keep market participants invested in the idea that the downturn in Q4 last year and Q1 this year isn't quite as bad.

The other piece of good news from the report is that there are signs of inflation pressures building, though it remains to be seen how much of that will be sustainable.

EUR/USD got a slight pop to 1.2125 on the back of this as the dollar is also keeping weaker across the board at the moment. Markit notes that:

"February's flash PMI results point to ongoing resilience in the German economy midway through the opening quarter, despite the country remaining under strict lockdown measures. Ongoing weakness in services, where large parts of the sector remain either closed or disrupted by virus containment measures, continues to be counterbalanced by strong, export-driven growth across manufacturing.

"It was encouraging to see manufacturing regain momentum in February after a slight setback in growth at the start of the year. Furthermore, the strong performance comes amid a backdrop of increasing supply-side pressures, with February's survey showing record reports of delivery delays and sharply rising input prices. Manufacturers seem to be weathering the storm so far, but there is the potential for some near-term disruption should the situation worsen and firms find themselves short of raw materials and components.

"Looking further down the line, businesses are growing in confidence about the outlook for activity in the year ahead, with the vaccine roll-out hoped to bring an end to restrictions later in the year and help release pent-up demand.

"Related to the supply-side issues observed in manufacturing, we've seen further signs of inflationary pressures emerging. Notwithstanding the lack of pricing power across the services economy, average output prices rose to the greatest extent for 18 months, with scope for a further acceleration in inflation as restrictions on the service sector are lifted in the coming months."