Purchasing managers index in October: economy is marching towards stagnation

Purchasing Managers’ Index in October
Economy is marching towards stagnation

Fresh figures from the purchasing managers indicate that the German economy will clearly lose momentum in October. The barometer is still above the growth threshold of 50 points, but still falls short of the expectations of economists.

Surprisingly, the German economy lost much of its momentum in October and is apparently heading towards stagnation. The purchasing managers’ index for the private sector fell by 3.5 points to 52.0 points, according to the IHS Markit institute for its monthly survey of hundreds of companies from the industrial and service sectors. This is an eight month low. Interviewed economists had only expected a decrease to 54.0 points. The barometer is still above the growth threshold of 50 points.

According to IHS Markit, material bottlenecks and the resulting slowdown in demand in the automotive sector were also a stumbling block for production in October. However, the barometer for industry fell only slightly to 58.2 points and far less than expected by experts who had 56.5 points on the slip.

At the same time, the upswing in the service sector lost momentum again: Here the barometer fell for the third time in a row and landed at 52.4 points, the lowest value since the start of the growth recovery in May. According to IHS expert Phil Smith, the October data indicate that economic growth in Germany will begin to stagnate at the beginning of the fourth quarter: “What is worrying is that the slowdown in growth coincides with a renewed acceleration in the rise in purchase and sales prices of companies. ”

The survey’s price indices appeared to have peaked in the summer, but the recent spike in energy and fuel prices helped add to inflationary pressures. As a result, companies raised sales prices at a record rate in October to cover higher costs.

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