Germany's economy witnessed a notable rise in the HCOB Manufacturing Purchasing Managers' Index (PMI) for March, reaching 48.3. This figure was higher than the projected 47.7. It increased to the highest level in 31 months and to a 10-month high. The Manufacturing PMI is making new highs, indicating a clear and continuing strengthening of Germany’s industrial sector. This is a remarkable improvement given the effects of the deepening economic slowdown.
The Services PMI from Germany dropped to 50.5 in March, below the expected 51.4. The HCOB Preliminary German Composite Output Index increased from 50.7 to 50.9. It unfortunately missed that mark of 51.2 by a lot. The composite index was up from February’s 50.4, indicating a slight expansion overall in both the manufacturing and service sectors.
The currency market offered its answer to these mixed signals on economic strength. As such, in the midst of the European session on Monday, the EUR/USD remained quite resilient, trading around 1.0850. The EUR/USD bounced after a three-day downtrend, rising 0.29% to just above 1.0845. Following the release of less than enthusiastic German PMIs, it retraced and even fell under 1.0850.
Manufacturing PMI Surges Ahead
Germany’s manufacturing sector surprised on the upside in the latest HCOB Manufacturing PMI, jumping to 48.3 in March. This figure blew projections out of the water and was a major step forward for the industry’s recovery path. Forecasts had called for a much lower figure of 47.7, though the result showed that the country’s industrial sector was showing some strength.
Germany’s manufacturing landscape must be thankful for such an accomplishment! This marked its highest level in 31 months, a tremendous rebound over the past few months even with continuous economic fallout still lingering.
The manufacturing sector was more resilient than forecast. The latter is a success story that can be chalked up to stronger demand and stronger production capabilities, a real sign of growing activity in the months ahead.
Services Sector Faces Decline
Germany’s Services PMI took a hit in March. The composite index dropped to 50.2, below the expected level of 51.4. This drop underscores the difficulties in the service-focused sectors of Germany’s economy, where consumer confidence and spending are still lacking.
Lowest reading for Services PMI against expectations. It had remained above the neutral mark of 50, reaffirming that the sector is still continuing to grow, albeit at a more measured rate than expected.
Germany’s economy is a study of contrasting dynamics. Overall, industrial activities are starting to pick up speed, while the previously lauded services sector is running into a wall.
Composite Output Index Shows Modest Improvement
The recent HCOB Preliminary German Composite Output Index started to come back in March, posting a reading of 50.9 versus February’s 50.4. It didn’t meet the projected 51.2, which would have indicated positive news in all industries.
Since the composite index captures both manufacturing and services activities, it serves as an excellent overall barometer of economic performance. Despite the manufacturing sector supporting the index with its improved performance, the weakened performance of the services sector held back larger increases.
Unsurprisingly, these figures indicate that Germany’s economy is still suffering while slowly on the mend. Despite these promising signs, some sectors continue to experience hardships that demand vigilant oversight and targeted intervention.
Currency Market Reaction
The EUR/USD currency pair had traded positively on Monday after the mixed German PMI stats. For their part, the pair was going strong over 1.0850. This strength happened despite a three-day selloff leading into the PMI prints.
EUR/USD added 0.29% on the day, to just above 1.0845. It subsequently pared some of those gains and dipped under 1.0850 as investors digested conflicting economic data.
Currency traders are uniquely focused on what’s happening to Germany’s economy. They’re working to measure how all of these developments may influence foreign exchange markets, and thus economic trends throughout Europe.