Technical Analysis

Germany November final services PMI 46.1 vs 46.4 prelim

  • Composite PMI 46.3 vs 46.4 prelim

A slight revision lower as services activity in Germany declines for a fifth successive month. Demand conditions continue to be hit hard as soaring inflation and economic uncertainty weighed on sentiment, even if input prices eased slightly to a three-month low (but it remains among the quickest on record). S&P Global notes that:

“November saw a sustained downturn in business activity across Germany’s service sector, with the combination of high inflation and an uncertain economic outlook causing both households and businesses to rein in spending. As a result, a contraction in GDP in Q4 looks firmly on the cards.

“Business expectations – although still at a depressed level – improved in November with the reduced likelihood of gas shortages this winter, hinting at the prospect of a shallower recession than initially feared. That said, there’s still a high level of uncertainty towards the outlook given the extent to which the economy is at the mercy of the weather, with gas rationing still a possibility in the event of an unusually cold winter.

“Price pressures continued to run hot in the service sector in November, with rates of input cost and output charge inflation still much closer to their recent record highs than their long-run trend levels. High energy costs combined with wage demands continue to lead many services businesses to raise prices.

“Given the decline in activity and pressure on businesses from rising costs, it’s encouraging to see continued resilience in labour market conditions. The survey’s measure of employment remains decoupled from that of business activity and still inside growth territory – albeit indicating only a modest pace of hiring.”

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