German Business Activity Contracts in July – Flash PMIs
2022.07.22 11:26
By Scott Kanowsky
Investing.com — Inflation-driven declines in both domestic and foreign demand caused business activity in Germany to contract for the first time this year in July, according to a closely watched survey of companies on Friday.
S&P Global said its flash German composite purchasing managers index, which is used to measure the health of business activity in the country, sank to 48.0 from 51.3 in June. A reading below 50 suggests contraction.
It is the lowest level in 25 months, and well below expectations of 50.1, as firms reported that soaring inflation ate into their budgets. Performance was also hit by ongoing supply chain disruptions and uncertainty stemming from the war in Ukraine.
Activity in both Germany’s manufacturing and services industries declined to 49.2. Economists had expected both sectors to remain in expansion territory, or above the 50-point mark.
Expectations for the future also darkened to levels not seen since the height of first wave of the COVID pandemic, according to S&P Global.
“[G]iven the noticeable falls in new business across both sectors, activity was somewhat prevented from experiencing a sharper fall thanks to the availability of previously secured contracts. With signs that this supportive prop is coming to an end, and warehouse inventories rising at a near-record rate in manufacturing, the outlook for output is turning increasingly negative,” said Paul Smith, economics director at S&P Global Market Intelligence.
Meanwhile, activity in France’s key services sector slowed to a 15-month low in July due to surging consumer prices that weighed on the inflow of new business.
The reading from S&P Global fell to 52.1 during the month, down from 53.9 in the previous period. Analysts had anticipated the figure to come in at 52.7.
“The growth trend in the service sector […] worsened further, and momentum is clearly to the downside here,” said S&P Global senior economist Joe Hayes.
