Germany’s flash Manufacturing PMI unexpectedly drops to 53.8 in September

Sagar Dua FXStreet

German flash HCOB Manufacturing PMI has come in lower at 53.8 in September. The data was expected to arrive higher at 54.5 from 54.3 in August. However, the overall business activity remain stronger-than-expected due to robust Services PMI data. The Composite PMI jumps to 53.8 rom the previous reading of 51.8. The Services PMI returns to the positive territory, arriving at 52.9 from 49.7 in August. A figure above 50.0 is considered as expansion in the business activity.

"German businesses reported further signs of resilience in September, with output growth picking up speed, expectations towards the outlook holding steady and employment rising for a second month running, all despite renewed pressure on the inflation front," Phil Smith, Economics Associate Director at S&P Global Market Intelligence said.

Market reaction

The initial reaction by the Euro (EUR) remains muted despite strong German Composite PMI data. At press time, EUR/USD is down 0.22% to near 1.1424 due to US Dollar's (USD) outperformance.

Economic Indicator

HCOB Manufacturing PMI

The Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and Hamburg Commercial Bank (HCOB), is a leading indicator gauging business activity in Germany’s manufacturing sector. The data is derived from surveys of senior executives at private-sector companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. As Europe’s main manufacturing hub, German PMI data can also be a bellwether of the sector’s health in the broader continent. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Euro (EUR). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for EUR.

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