- Final Services PMI 50.6 vs. 50.6 expected and 51.2 prior.
- Final Composite PMI 47.5 vs. 47.2 expected and 48.4 prior.
Key findings:
- HCOB Germany Services PMI Business Activity Index at 50.6 (Aug: 51.2). 6-month low.
- HCOB Germany Composite PMI Output Index at 47.5 (Aug: 48.4). 7-month low.
- Growth expectations slump to lowest in a year.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“The services sector is starting to lose its role as an anchor of economic stability. Growth in the sector has slowed for the fourth month in a row, nearly coming to a halt in September. What is really worrying is the sharp drop in new orders, which had already lost a lot of momentum over the previous three months. If this downward trend keeps up, the situation in the services sector may get worse before getting better.
Service providers are still feeling the pinch from high costs, though the pressure has eased quite a bit, now at its lowest since early 2021. This is not necessarily because wage increases have slowed down, but more likely due to the sharp drop in oil and gas prices in September as well as lower financing costs. The struggles in the industrial sector are starting to spill over into services.
Many service providers work directly with manufacturing companies, and as the latter tighten their belts, outsourced services are often the first thing on the chopping block. As a result, service providers have been cutting staff over the past three months, and the pace of layoffs sped up in September.
Confidence in the sector has taken a hit too. Some of the surveyed businesses are worried about a recession and a deeper slump in manufacturing. And they are not wrong to be concerned. Our GDP estimates, which factor in the HCOB PMI, suggest that the economy shrank again in the third quarter after contracting in the second, and the momentum is downwards.”
