“The unprecedented decline in the PMI shows that Germany is facing a recession – a severe one, in fact.”
The purchasing managers’ index for Germany (Markit PMI; March) has just been published. It shows a real collapse of the German economy:
Manufacturing 45.7 (forecast was 39.6; previous month was 48.0). However, this is distorted by the delivery times, which are lengthening, making the index better than it actually is, see below Phil Smith’s statements.
Service 34.5 (new all-time low; forecast was 39.6; previous month was 52.9).
Overall index 37.2 (worst value since February 2009; forecast was 40.6; previous month was 50.7).
Brutal downward figures
“The unprecedented decline in the PMI shows that Germany is facing a recession. As a matter of fact, it is facing a severe one. The March data signal a quarterly decline in GDP of around 2% and with the intensified measures to contain the virus we must be prepared for the downturn to accelerate further in the second quarter of 2020. The service sector has so far borne the brunt of the government’s measures to contain COVID-19. Here, business slumped more dramatically than at any time in the 23-year history of the survey. The pace of decline is faster than anything we have seen since the peak of the global financial crisis. In the industrial sector, the downward trend has also accelerated, although the situation is far more dramatic than the PMI suggests. For example,the disruption to supply chains has meant that we are seeing the opposite trend in delivery times and input material stocks than is normal in a recession. This has artificially boosted the PMI. In any case, production and order data are worse than they have been for ten years, although not quite as bad as in the service sector.”