December 26, 2022
Key findings:
Flash Germany PMI Composite Output Index(1) at 48.9 (Nov: 46.3). 6-month high.
Flash Germany Services PMI Activity Index(2) at 49.0 (Nov: 46.1). 5-month high.
Flash Germany Manufacturing Output Index(4) at 48.7 (Nov: 46.6). 6-month high.
Flash Germany Manufacturing PMI (3) at 47.4 (Nov: 46.2). 3-month high.
December’s ‘flash’ PMI® data from S&P Global showed a shallower downturn in business activity across Germany’s private sector economy, with rates of contraction easing across both manufacturing and services. Price pressures meanwhile continued to cool from the record highs seen earlier in the year, although they remained historically elevated. On balance, businesses were still pessimistic about the year-ahead outlook for activity, but less so than in November.
The headline S&P Global Flash Germany PMI
Composite Output Index registered in sub-50 contraction territory for a sixth straight month in December. However, at 48.9, up from November’s 46.3, its latest reading was the highest in the aforementioned sequence and indicative of only a modest rate of decline in private sector activity. Underlying data showed slower decreases in both manufacturing production and service sector activity in December. The rates of contraction were the weakest for six and five months respectively. Where a reduction in output was recorded, firms often linked this to weaker demand, citing the impact of uncertainty among customers and high prices.
In line with the trend in output, the decline in overall inflows of new work eased in December, registering the shallowest decrease for four months. That said, the rate of contraction in new business remained sharp overall and notably quicker than that for output. Supporting output levels to some extent was an improvement in material availability, anecdotal evidence showed. This was also underscored by a sharp reduction in supplier delivery times faced by manufacturers, which was partly linked to falling demand for inputs.
Easing supply chain bottlenecks in turn contributed to a further reduction in pipeline price pressures at the end of the fourth quarter. Input cost inflation fell for the third month in a row to its lowest since March 2021, led by a slowdown in manufacturing purchase prices. Overall operating expenses still rose at a faster rate than the historical series average, however, amid widespread reports of the pass-through of high energy costs and wage demands.
Similarly, average prices charged for goods and services continued to rise rapidly by historical standards, as firms looked to pass on higher costs to customers where possible. That said, with both monitored sectors reporting slower increases in output prices, the overall rate of inflation ticked down for the third month in a row and was the lowest since August 2021.
Turning to employment, December’s survey pointed to a continued steady rise in workforce numbers across Germany’s private sector. The pace of job creation was broadly in line with those recorded in both October and November, but remained much slower than seen on average over the first half of the year. Firms in both monitored sectors reported taking on staff to fill vacancies.
Accordingly, December saw a further broad-based reduction in backlogs of work as pressure on business capacity continued to ease. The rate of depletion was unchanged from November. This masked contrasting trends at the sector level, as a faster decline in service sector outstanding business was offset by a slower (though still sharp) fall in manufacturing order backlogs.
Source: S&P Global German PMI®
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