Germany’s private sector economy regained momentum in August, posting its first significant expansion in five months, with a manufacturing-led rebound lifting overall activity, according to fresh survey data.
PMI Climbs Above Expectations
The Hamburg Commercial Bank (HCOB) Flash Germany Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 50.9 in August from 50.6 in July, the strongest reading since March. The figure beat a Reuters poll forecast of 50.2, offering cautious optimism for Europe’s largest economy.
“Germany’s economy has been growing throughout the summer so far, and the pace of expansion has even picked up slightly,” said Cyrus de la Rubia, chief economist at HCOB. “While we’re talking about modest gains here, this trend signals resilience — considering the headwinds like U.S. tariffs, geopolitical uncertainty, and relatively high long-term interest rates.”
Manufacturing Leads the Recovery
The manufacturing sector spearheaded growth, with its output index climbing to 52.6 in August from 50.6 in July — the highest in nearly three and a half years. The expansion was fuelled by a surge in new domestic orders, the sharpest since March 2022, even as export demand dipped slightly.
By contrast, Germany’s services sector showed signs of weakness, as its business activity index eased to 50.1 from 50.6, a two-month low that points to stagnation.
Employment Decline Remains a Concern
Despite the stronger PMI readings, employment continued to contract, with manufacturing job cuts outweighing modest hiring in services. The latest data extends a downward trend in overall employment that began in June 2024.
Rising Costs Add to Inflation Pressures
Both input costs and output prices increased in August, reversing declines seen in July. The rise was led by the services sector, where higher wages contributed significantly to cost pressures.
A Resilient But Uneven Expansion
The PMI data highlights that while Germany’s economy is showing resilience, challenges persist. Manufacturing strength has offset some services weakness, but persistent job losses and renewed price pressures could cloud the outlook.
Still, analysts suggest the numbers provide reassurance that Germany’s industrial backbone is regaining strength, offering hope for broader stability across Europe’s economy.
