Germany’s flash Manufacturing PMI unexpectedly rises strongly to 52.2 vs. 50.1 estimates

Sagar Dua FXStreet

German flash HCOB Composite PMI returns to the expansion trajectory in July after declining in June. Preliminary figures show that the overall business activity expanded to 51.2. The Composite PMI was seen arriving at 49.8 from 49.5 in June. A figure below 50.0 is considered a contraction in overall business activity. The Composite PMI increased significantly due to upbeat factory sector activity.

The Manufacturing PMI rises at a stronger-than-expected pace to 52.2 from 50.3 in June, beating 50.1 estimates. The Services PMI contracts again but at a moderate pace to 49.6. The data was seen marginally higher at 48.8 from the previous reading of 48.6.

"The German economy made a positive start to the third quarter, with the Composite PMI returning to growth territory after having signalled a three-month spell of contraction following the outbreak of war in the Middle East. However, given the escalating hostilities in the region in the past week or so, which have put renewed upward pressure on global energy prices, the path to a sustainable recovery still seems very much uncertain," Phil Smith, Economics Associate Director at S&P Global Market Intelligence said.

Market reaction

The initial reaction by the Euro (EUR) appears to be negative after the data release. EUR/USD retreats from its intraday high of around 1.1400

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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