Baxia Markets
June 23, 2021

Germany On The Mend

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What is it? 


The Services PMI released by the Markit Economics interviews German executives on the status of sales, employment, and their outlook. Because the performance of the German service sector is extremely consistent over time, services do not impact final GDP figures as much as the more volatile figure on the manufacturing sector. Any reading above 50 signals expansion, while a reading under 50 shows contraction.

The Manufacturing Purchasing Managers Index (PMI) released by the Markit economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in Germany. Normally, a result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish.



What are the Expectations?


The expectation is for the Markit Services PMI to increase to 55.5 higher than before.

The expectation for the Markit Manufacturing Services PMU is 63  lower than before.



Professional Insight


The IHS Markit Services PMI for Germany was unrevised at 52.8 in May of 2021, above 49.9 in April, and pointing to the strongest growth in the services sector since July of 2020. Businesses revealed a boost from the easing of COVID-19 restrictions as well as a marked rise in new business which was the strongest in almost two years. The pace of job creation was solid and unchanged from April's 15-month high. At the same time, however, there was a further intensification of cost pressures in the sector to the highest since mid-2008. Prices charged also rose at a faster rate, one that was the quickest since January 2020, but still much more slowly than costs.



What happens if...


Results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration, or no change since the previous month. From these percentages, an index is derived: a level of 50.0 signals no change since the previous month, above 50.0 signals an increase (or improvement), below 50.0 a decrease (or contraction).

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