GERMAN DATA: Jan Flash PMIs: Stronger Than Expected With Inflationary Uptick

Both the services and manufacturing components were stronger-than-expected in the German January flash PMIs, helping the composite reading tick back into expansionary territory for the first time since June 2024. In contrast to France, input cost pressures were passed into output charges, helping the hawkish reaction post-data to stick.

• Manufacturing was 44.1 (vs 42.7 cons, 42.5 prior), and has been contractionary for over two years now.
• Services was 52.5 (51.0 cons, 51.2 prior), while the composite reading was 50.1 (48.3 cons, 48.0 prior).

Highlights from the release:

• “Latest data indicated a sustained decrease in demand for goods and services across Germany. Inflows of new business fell in both monitored sectors”
• “Weakness remained centred on the manufacturing sector, where strong competition from non-domestic producers was reportedly compounded by customers holding back spending due to economic and political uncertainty”
• “With firms having more than sufficient capacity to deal with current output requirements, they continued to trim workforce numbers during January”.
• “Increased fuel prices, a higher CO2 tax and wages were the main drivers of a sharp and accelerated rise in service sector input costs in January”.
• “It was a similar story for output prices as a faster increase in service sector charges coincided with a reduction in the degree of discounting amongst goods producers”.