Germany's manufacturing and services sectors showed improvement in July, with key business activity indicators reaching 4-month highs, according to data released by S&P Global on July 24. The manufacturing PMI preliminary reading came in at 52.2, surpassing the 50.0 expansion threshold and marking the highest level in four months, while the services PMI preliminary reading reached 49.6, still below the 50.0 baseline but showing improvement from June's 48.6. The improvement was driven by increased new orders, particularly from overseas markets, and slowing cost inflation in the manufacturing sector. The composite PMI, combining both manufacturing and services, returned to expansion territory at 51.2 after three consecutive months of contraction following the outbreak of conflict in the Middle East.
Germany Manufacturing PMI Reaches 52.2 in July
The July manufacturing PMI preliminary reading of 52.2 exceeded June's 50.3 figure and moved into expansion territory above the 50.0 baseline that separates contraction from expansion. This marked the sector's strongest performance in four months. Production in the manufacturing sector increased significantly during July, with the production growth rate recording its highest level in nearly four and a half years. New orders increased, with overseas markets showing particular strength in driving manufacturing activity.
Services Sector PMI Improves to 49.6 Despite Remaining Below Expansion Threshold
The services PMI preliminary reading for July came in at 49.6, remaining below the 50.0 expansion threshold but showing improvement compared to June's 48.6. This represented the sector's highest reading in four months. Services sector demand increased for the first time in five months, and overall economic confidence improved. However, service companies faced stronger cost pressures in July compared to previous months.
Composite PMI Returns to Expansion at 51.2
The composite PMI, which combines manufacturing and services sectors, reached 51.2 in July, marking a four-month high. This represented a return to expansion territory after three consecutive months of contraction. The composite index had shown contraction for three months following the outbreak of conflict in the Middle East.
S&P Global Cites Production Growth and Overseas Orders as Key Drivers
Phil Smith, Economics Associate Director at S&P Global, stated that the German economy showed a positive start to the third quarter, with the composite PMI returning to expansion after three months of contraction following the Middle East conflict outbreak. Smith noted that manufacturing had a very strong month in July, with production growth reaching its highest level in nearly four and a half years. He attributed the manufacturing sector's performance to increased new orders, particularly from overseas markets, and noted that slowing cost inflation provided some relief. For the services sector, Smith observed signs of business activity stabilizing, supported by the first increase in services demand in five months and improved overall economic confidence. However, he pointed out that service companies faced stronger cost pressures in July. Smith also noted that escalating hostilities in the Middle East over the past week have put renewed upward pressure on international energy prices, and that rising oil prices could lead to a period of renewed inflation pressure.
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Source: S&P Global
FAQ
What did Germany's manufacturing PMI reach in July?
Germany's manufacturing PMI preliminary reading reached 52.2 in July, exceeding the 50.0 expansion threshold and marking a four-month high compared to June's 50.3.
Why did Germany's manufacturing sector improve in July?
The manufacturing sector improved due to increased new orders, particularly from overseas markets, and slowing cost inflation. Production growth reached its highest level in nearly four and a half years.
How did Germany's services sector perform in July?
The services PMI reached 49.6 in July, improving from June's 48.6 but remaining below the 50.0 expansion threshold. Services demand increased for the first time in five months, though service companies faced stronger cost pressures.
