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Prior 47.0Services PMI 53.3 vs 52.5 expectedPrior 52.7Composite PMI 52.5 vs 51.6 expectedPrior 51.3Full report hereKey Points:Business activity growth quickens in January, but labour market
conditions deteriorateComment:Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“The data show a good start to the new year, overall. Output in the manufacturing sector returned to – albeit meagre –
growth, and so did new orders. Even more encouraging is the stronger pickup in activity in the services sector. Looking
ahead, confidence has risen noticeably in the services sector and has held at a solid level in manufacturing.
“While there are signs of a modest recovery, services companies have trimmed their workforce significantly in January,
which might point more to efficiency measures than to concerns about demand. In manufacturing, the process of cutting jobs
has continued unabated. Since this has been ongoing since mid-2023, there’s now a lot of debate about whether this is a
structural issue, one that would require structural answers in the form of reforms that are anything but easy to implement.
“In the services sector, the situation has brightened quite a bit. Pricing power seems to have increased significantly as sales
price inflation has moved up. While that partly reflects higher input costs, the rise in sales price inflation has been even
stronger. With new business growing more robustly than last month, service providers are becoming more self-confident –
something that also shows up in their much higher optimism for future activity.
“Meanwhile, the International Monetary Fund has upgraded its 2026 GDP growth forecast for Germany by 0.2 percentage
points to 1.1%, reinforcing the sense that growth prospects are improving. Still, the recovery remains rather fragile. The
continued drop in inventories and another decline in backlogs of orders in manufacturing are clear examples. Yet, the
unusually large fiscal stimulus through much higher spending on defence and infrastructure should provide a noticeable
boost to the economy.”
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The January PMI data shows business activity growth, but the deteriorating labor market could signal trouble ahead. With the Services PMI at 53.3, beating expectations, it’s clear that demand is holding up, which is good news for sectors tied to consumer spending. However, the Composite PMI’s slight dip to 52.5 suggests that while growth is present, it may not be sustainable if labor conditions worsen. Traders should be cautious, as a weakening labor market can lead to reduced consumer confidence and spending, impacting sectors like retail and services. Keep an eye on related assets, particularly those in the consumer discretionary space, as they could feel the pinch if this trend continues. Watch for key levels in the broader market, especially if the PMI data influences central bank policy decisions in the coming weeks. If the Composite PMI falls below 50, it could trigger a bearish sentiment shift across markets, so that’s a critical level to monitor.
📮 Takeaway
Watch the Composite PMI closely; a drop below 50 could signal broader market weakness and impact consumer-related stocks.
