Germany December flash manufacturing PMI 47.7 vs 48.5 expected

Prior 48.2Services PMI 52.6 vs 53.0 expectedPrior 53.1Composite PMI 51.5 vs 52.4 expectedPrior 52.4This is in contrast to the better than expected French PMIs. In fact, the gains seen in the euro following the French release got erased. Overall, this doesn’t change anything for the ECB though. The central bank will likely maintain its neutral stance and keep monitoring economic developments.Comment:Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“What a mess, one might exclaim in view of the further downturn in the manufacturing sector. For the second month in a
row, the headline manufacturing PMI has fallen deeper into sub-50 contraction territory, and for the first time in ten months,
production is also declining. The latter comes as no surprise, as order intakes had already slumped in November. This trend
has now continued, which does not bode well for the start of next year.
“Despite warning lights flashing in the industry, there are significantly more manufacturing companies looking ahead to the
coming year with confidence in December. The corresponding index has jumped upwards, possibly reflecting the fact that
the government has launched a number of transport projects, decided on reforms to reduce bureaucracy, and wants to
expand defence capabilities. Only if these measures result in an increase in incoming orders will the industry regain
momentum.
“The service sector is losing momentum for the second month in a row. However, business activity continues to grow visibly,
as evidenced by the stronger expansion of staff. New business has been increasing steadily for three months and overall,
the service sector is stabilizing the economy as a whole and is likely to contribute significantly to positive GDP growth in the
fourth quarter.
“While confidence in the manufacturing sector has increased visibly, the assessment of the next 12 months in the service
sector has weakened in December. It is possible that people believe that the economic stimulus package and higher
defence spending will primarily benefit construction companies, the mechanical engineering sector, and companies that
produce directly or as suppliers in the defence sector, while service providers tend to come away empty-handed. “However,
this does not have to be the case, because industrial production usually also involves activities that are accompanied by
service providers such as consulting firms, auditors, and software developers. In addition, there are the so-called multiplier
effects, because employees of companies that receive additional (government) orders are more likely to treat themselves to
an extra visit to a restaurant or a concert that they would otherwise have foregone.”
This article was written by Giuseppe Dellamotta at investinglive.com.

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