Services and manufacturing help Germany take step forward in recovery

Germany has shown growth for the first time in five months,  with the pick-up led by services and export sales 
Services and manufacturing help Germany take step forward in recovery
German Chancellor Angela Merkel arrives for an EU summit at the European Council building in Brussels. Picture: John Thys, Pool Photo via AP

Germany took a step forward in its recovery from the coronavirus slump, with a key measure of activity showing growth for the first time in five months, while the French economy also had a better-than-expected restart.  

IHS Markit’s composite Purchasing Managers Index jumped to 55.5 in July from 47 in June. The figure was better than economists had predicted, and puts the gauge above the key 50 level that divides expansion from contraction.

The reading keeps Europe’s largest economy heading in the right direction after a devastating downturn in the second quarter during the virus lockdowns. 

Figures next week are forecast to show a contraction of about 9% in the three months through June. That will reflect the depth of the slump, with surveys pointing to an improvement more recently.

The Markit report showed the pickup in July was led by services, though manufacturers reported a “solid” rise in export sales. Despite that, factory employment fell, with 30% of manufacturers reporting a drop in staff numbers.

“For an economy that is steered so much by exports, it was encouraging to see manufacturers reporting a notable upturn in sales abroad,” said IHS market economist Phil Smith. “However, one of the main concerns remains the labour market, and the ongoing cuts to manufacturing jobs in particular,” he said.

In France, the economy saw better-than-expected growth in July, marking a solid start to the third quarter after the virus-related contraction.

The latest Purchasing Managers Index rose 57.6 from 51.7, beating economists forecast for a reading of 53.5. Demand also improved, led by domestic sales, with exports continuing to decline.

“The economy has entered its recovery phase following the Covid-19 lockdown,” said Eliot Kerr, an economist at IHS Markit, which compiles the report. 

Bloomberg

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