- Final Services PMI 51.2 vs. 51.4 expected and 52.5 prior.
- Final Composite PMI 48.4 vs. 48.5 expected and 49.1 prior.
Key findings:
- HCOB Germany Services PMI Business Activity Index at 51.2 (Jul: 52.5). 5-month low.
- HCOB Germany Composite PMI Output Index at 48.4 (Jul: 49.1). 5-month low.
- Input cost inflation slows to three-and-a-half year low.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“Without growth in the private service sector, Germany’s economic picture would be pretty grim. This sector, which accounts for just over 40% of the economy, has been a major stabilizing force, offsetting the recessions in manufacturing and construction. But that support is starting to weaken. Growth slowed again in August. Even though lower inflation and higher wages should be boosting the service sector, the growth trend has been sliding downhill for three months now.
From a business perspective, there are some positive signs. Cost pressures have eased a bit, and service providers have managed to raise their prices more than they did the month before. Companies have also sharpened their focus on efficiency lately. Despite trimming their workforces slightly, they’ve still managed to grow, though at a slower pace. If these trends keep up, we could be looking at a potential boost to profit margins. Confidence among service providers about their economic activity in a year's time remains average, which is good news in the current circumstances.
However, it also shows that moderate growth is to be expected at best, but potentially even lower activity. This caution is reflected in the sluggish pace of new business, the continued - albeit slightly slower - decline in order backlogs, and a significant drop in export business. At first glance, Germany seems to be the worst performer in the service sector among the major eurozone countries, with France notably pulling ahead in August.
However, this gap is likely due to the “Olympic effect”, as some survey participants have pointed out. In reality, France's services sector had been stagnant at best in previous months. When you look at Italy, Germany's performance is only slightly weaker. You could argue that Germany is just about average, but that is hardly reassuring. If this middling performance in services continues, it could make an overall economic recession more likely.”
