- Prior 40.8
- Services PMI 48.7 vs 48.5 expected
- Prior 48.2
- Composite PMI 47.1 vs 46.5 expected
- Prior 45.9
The euro is nudging higher as the German economy shows signs of improving prospects in November. The manufacturing recession is not worsening much more and there are recovery signals, which is much welcome for the ECB too. Overall, the economy is seen contracting at a slower pace this month, putting off any heavy recession calls. HCOB notes that:
"Christmas is nearing and so is some hope for the German economy. Despite remaining in recession territory, the rate of slowdown has eased noticeably. Particularly heartening is the robust increase across nearly all subindices. This collective upswing fuels our growing confidence that a return to growth territory is a plausible prospect, potentially materialising by the first half of the upcoming year.
“The November PMI numbers validate our assessment that Germany is currently in a recession, starting from the third quarter. But the recession may be shallower than expected. Feeding the current PMI figures into our Nowcast model reveals a 0.7% decline in GDP from October to December compared to the third quarter. This is an improvement from the previously projected -0.9%.
“In manufacturing there is a silver lining as the decline in new orders is tapering off. This is supported by both domestic and external orders. In addition, there's a noteworthy slowdown in the reduction of stock of purchases, coupled with smaller cuts to new purchases.
“The service sector's slowdown appears to be taking a milder trajectory. In November, the decrease in activity has shown signs of softening, and the decline in new business is notably less severe than in the previous month. Furthermore, a positive shift is observed as service providers have ceased reducing employment, marking a departure from the downward trend witnessed in the previous two months.
“Inflation remains alive and kicking, contrasting with wide held expectations. Input prices in the service sector surged rapidly in November, surpassing the previous month's rate. This has been mainly fueled by upward pressure on wages. Part of this increase is passed on to consumers, as service sector output prices are still increasing at an unusual high rate. With a rise in strike activities and some of the recent wage agreements hitting double digits, the outlook suggests that inflation is unlikely to experience a significant decrease in the coming months."
