Economic Buzz: German business activity again sees only marginal growth in August
The result was seen alongside a renewed fall in intakes of new work as well as a stalling of hiring activity. Business expectations were nevertheless little-changed, with firms still slightly more optimistic about future growth prospects than the historical average.
As for prices, latest data showed an uptick in the rates of both input cost and output charge inflation, which had reached their lowest since early 2021 in July. At 49.3 in August, the headline HCOB Germany Services PMI Business Activity Index was down from 50.6 in July and therefore back below the neutral 50.0 threshold that separates growth from contraction.
As has been the case in each month since May last year, services companies in Germany recorded a reduction in outstanding business (i.e. the volume of orders or projects awaiting completion) during August. Cost savings was one of the factors mentioned by those firms that reduced employment on the month.
The rate of increase in output prices across the German service sector likewise ticked up in August, having reached its lowest since April 2021 the month before.
The HCOB Germany Composite PMI Output Index came in at 50.5 in August, little-changed from July's 50.6 and signalling a marginal rate of business activity growth for a third straight month.
The relatively consistent picture for overall output growth did however mask a divergence at the sector level, with a stronger increase in manufacturing production contrasting with a renewed decline in the service sector. This dichotomy also extended to new orders, which were down slightly on the month thanks to the drag from services.
Employment meanwhile fell at the quickest rate for six months, but in this case the decline was centred on manufacturing. The goods-producing sector also led a slight drop in business expectations, which slipped to a three-month low.
On the price front, overall inputs costs rose at the quickest rate since March. The rate of output charge inflation likewise ticked up, but it continued to run below its long-run average due to discounting in the manufacturing sector.
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