Germany’s Private Sector Returns to Growth after Contraction due to COVID-19 Pandemic

In April, Germany’s private sector surprisingly returned to growth, with the HCOB German Flash Composite Purchasing Managers’ Index (PMI) rising to 50.5 from 47.7 in March. This was the first reading above the 50 mark in 10 months and tracked both the services and manufacturing sectors that together account for more than two-thirds of the German economy.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented on these latest PMI numbers and said that they estimate GDP may expand by 0.2% in the second quarter following an estimated 0.1% growth in the first quarter. The index for the service sector rose to 53.3 this month from 50.1 in March, its highest level in 10 months, suggesting that it may serve as a catalyst for the overall economy.

While manufacturing remained in contraction, there was a slight decline in factory production but confidence amongst goods producers reached its highest level in a year. The manufacturing PMI index rose to 42.2 from 41.9 in the previous month but fell short of forecasting of 42.8 in a Reuters poll. Additionally, there was a slight increase in price pressures at the start of the second quarter, with input cost and output price inflation ticking up but remaining broadly in line with their respective long-run averages.

The survey results indicate that Germany’s private sector is showing signs of recovery after several months of contraction due to the COVID-19 pandemic impact on businesses globally. While some sectors are still struggling to recover, others are showing positive signs of growth and could be catalysts for driving economic recovery across Germany as well as other countries facing similar challenges during this time of uncertainty and economic turmoil caused by COVID-19 outbreaks worldwide