German PMI unexpectedly fell in May

Thursday, May 21 2015

May’s flash PMI results signalled a further slowing in economic growth in Germany’s private sector. Flash Germany Manufacturing PMI fell 51.4 from 52.1 in April, what is a 3-month low, while Flash Germany Services PMI declined to 52.9 from 54.0 in April, what is a 5-month low. Analysts were predicting no significant change in both sectors. Companies reported weaker expansions in both output and new orders, with some survey participants commenting on weak demand, economic uncertainties and rising cost pressures.

Indeed, input costs increased at the sharpest rate in over two-and-half years as companies faced a combination of unfavourable exchange rates, rising staff costs and higher oil prices. While the survey data are consistent with further GDP growth heading into the middle of the year, it looks as if this rate of expansion of the German economy will remain sluggish in the months ahead. On a more positive note, employment growth picked up slightly in May, with the labour market so far avoiding any ill effects from weaker output growth.

On the other side, while economist were forecasting slight decline, Eurozone Manufacturing PMI rose to 52.3 from 52.0 in April, what is 13-month high. However, Flash Eurozone Services PMI fell to 53.3 from 54.1 what is a 4-month low and below expected decline to 53.9. The survey suggests, however, that growth could continue to soften in June. Growth of new business inflows moderated for a second month running to register the smallest monthly gain since February. Weaker order book growth was centred on the service sector, with manufacturing reporting the strongest inflows of new orders for just over a year, linked to improved export performance. Expectations of future growth in the service sector meanwhile slipped, dropping to a five-month low.

Regardless of figures, euro continued its uptrend and is currently being traded few points above 1.1130 level. Pair is likely to find support around 1.1050 area and resistance near 1.1180 level. Later today, in the US session, Unemployment Claims, Existing Home Sales and Philly Fed Manufacturing Index data is scheduled for a release.

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