Market Analysis

German Business Activity Grows for Second Month in May: PMI

Amos Simanungkalit · 23 May 20243.5K Views

In May, German private sector activity expanded for the second consecutive month, driven by robust performance in services, according to a preliminary survey released on Thursday. The HCOB German Flash Composite Purchasing Managers' Index (PMI), compiled by S&P Global, increased to 52.2 from April's 50.6, surpassing expectations set at 51.0 in a Reuters poll.

The composite PMI tracks the services and manufacturing sectors, which collectively form a significant portion of the euro zone's largest economy. A reading above 50 indicates growth in activity.

Chief economist Cyrus de la Rubia from Hamburg Commercial Bank commented optimistically, stating, "These numbers provide encouragement," noting that the composite PMI now points to solid growth.

The service sector PMI rose to 53.9 in May from 53.2 in April, marking its highest level in 11 months and exceeding the forecasted 53.5. "The service sector exhibited robust expansion for the third consecutive month," de la Rubia highlighted.

While manufacturing continued to contract, its PMI rose to 45.4 in May from 42.5 in April, reaching a four-month high and surpassing expectations of 43.1 in a Reuters poll.

De la Rubia cautioned, "Although the headline manufacturing PMI increase is positive, the accelerated reduction in inventories of purchased and final goods slightly moderates the outlook."

Despite manufacturing challenges, overall hiring activity increased as firms reported stronger demand and improved optimism about future prospects, according to the survey.