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Title: German economy remains on growth path for now –PMI

May 24, 2022 04:11AM ET

By: AnalysisWatch

A continued upturn in the services sector helped economic activity in Germany return to growth in May, although there are signs that rising prices, market uncertainty and supply problems are starting to weigh on demand, a preliminary survey showed Tuesday.

S&P Global's purchasing managers' index (PMI) for the services sector came in at 56.3 in May, down from April's final reading of 57.6 but well above the 50 mark, indicating growth for the fifth consecutive month. Analysts had expected a decline to 57.2.

The flash manufacturing PMI improved slightly to 54.7 this month from April's final reading of 54.6, above the 54.0 expected by analysts in a Reuters poll.

This also helped the combined flash PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, beat the 54.0 analysts expected, rising to 54.6 from 54.3 in April.

Phil Smith, associate director of economics at S & P Global, said the survey suggests manufacturers are working through their order backlogs to shore up production after new orders fell at the fastest pace since June 2020, with new export orders particularly hard hit.

The roughly 800 companies surveyed said customer uncertainty, severe price pressures, supply disruptions, and COVID-related closures in China had weighed on demand for goods.

"The recovery in service activity after the shutdown continues to provide a strong tailwind for the German economy," he said.

However, good manufacturers are increasingly turning to order backlogs to support production as new orders show a continued decline. "This does not bode well for the sector's growth prospects if demand for goods continues to falter," Smith added

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