In October, Germany's private sector experienced a slightly slower pace of decline, with output contracting at a reduced rate while business expectations improved, according to the latest HCOB Purchasing Managers' survey by S&P Global, published on Thursday.
The preliminary composite output index increased to 48.4 in October, up from September's seven-month low of 47.5. This figure also surpassed the anticipated 47.6. Nonetheless, the index remained below the 50.0 mark, which signifies the boundary between growth and contraction, a trend persisting since July.
The Services Purchasing Managers' Index reached a three-month peak at 51.4, while predictions had pegged it at 50.6, unchanged from September's figure. Similarly, the manufacturing PMI rose to a three-month high of 42.6, compared to 40.6 the previous month, outpacing forecasts which suggested a slight increase to 40.7.
The data once again underscored a continuing weakness in underlying demand, with new business inflows declining sharply for the fifth consecutive month in October. Additionally, there was a marked drop in the backlog of work, prompting companies to reduce their workforce. Employment levels declined for the fifth consecutive month.
Despite this, the number of firms anticipating increased activity over the following year exceeded those predicting a decrease. However, these business expectations remained significantly below the long-term series average.
On the pricing front, average prices charged remained largely unchanged in October. Meanwhile, average input costs rose at a moderate rate, consistent with the 14-month low observed in September.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated, "GDP may remain flat for the entire year, as projected by the International Monetary Fund in its latest forecast, following a 0.3% decline in 2023." He further commented, "Manufacturing is likely to remain in recession during the fourth quarter, although it might commence next year with a better outlook, despite this assessment being based on a one-month improvement, which should be interpreted with caution."
