Germany Services Lose Momentum as Catch-Up Effects Persists

Business people vector with german flag and country outline on grey background

Germany’s services sector activity continued to expand strongly in September, but the recovery from the COVID-19 pandemic lost steam as catch-up effects are waning.

Source: IHS Markit

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IHS Markit’s final Purchasing Managers’ Index (PMI) for the services sector dropped to 56.2 from 60.8 in August, still higher than the 50 mark that separates growth from contraction.

IHS Markit Economist Phil Smith stated the survey suggested Germany was heading towards a more moderate period of economic growth in the final months of the year.

Smith further stated that current forecasts are for a 3.0% quarter-on-quarter increase in GDP in Q3, followed by a 1.2% expansion in Q4.

The composite PMI index that integrates both services and manufacturing sectors cools down to 55.5 from 60.0 in August, reflecting the continued recovery of the manufacturing sector.

The German economy contracted by 2.0% quarter-on-quarter in the first three months of the year and then grew by 1.6% quarter-on-quarter in the three months from April to June.

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