Latest data released by Markit/BME - 24 March 2021
This is quite a stellar report, all things considered, with the headline reading jumping to its highest level in 37 months. Meanwhile, the services sector also shows a marked improvement despite lockdown measures being in place in Germany.
The details show that the jump in manufacturing activity was driven by a record high in the manufacturing output index, reflecting higher production levels alongside growing order books - a solid sign of demand conditions returning.
The only downside is that cost inflation has jumped up a little, as expected during this period - which should translate to consumer inflation eventually.
Markit notes that:
"The 'flash' PMI pointed to a notable upturn in German business activity in March, with the data therefore hinting at the prospect of a better-than-expected economic performance in the first quarter. The result owed to a combination of survey record growth in manufacturing output and a better performance from services, where some firms benefitted from the slight easing of lockdown restrictions.
"The sustained upturn in the factory sector has seen the manufacturing PMI reach unprecedented heights, with growth in global demand for German goods showing no signs of abating and businesses reporting that previously-delayed investments are now being realised. On the flip side, however, supply chains are coming under increased pressure from the upturn in the manufacturing sector, which is pushing up factory input costs at one of the quickest rates in nearly 25 years of data collection.
"We're also seeing price pressures increasingly emerging in the service sector, with average charges for goods and services now rising at the fastest rate for two years. Adding to the inflationary story was an acceleration in the rate of employment growth, as manufacturers finally signalled a return to job creation after a long period of retrenchment.
"Businesses remain highly optimistic about the outlook over the coming year, with many pinning their hopes on progress in the vaccine rollout. However, with the "emergency brake" restrictions coming into effect in April to stem a third wave of infections, the immediate outlook looks less promising."
