Germany’s private sector shows resilience before stricter lockdown: PMI

FILE PHOTO:  Outbreak of the coronavirus disease (COVID-19) in Berlin
FILE PHOTO: People walk at the shopping street, Wilhelmsdorfer, before Germany goes back to a nationwide hard lockdown due to the coronavirus disease (COVID-19) outbreak, in Berlin, Germany, December 15, 2020. REUTERS/Annegret Hilse/File Photo

December 16, 2020

BERLIN (Reuters) – Germany’s private sector showed resilience in December as manufacturing picked up steam and services partly recovered ahead of a stricter lockdown to contain a second wave of coronavirus infections, a survey showed on Wednesday.

Chancellor Angela Merkel and state leaders have agreed to shut most stores and schools from Wednesday until at least Jan. 10 to reverse a tide of COVID-19 infections that lighter restrictions introduced on Nov. 2 have failed to tame.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of Europe’s largest economy, rose to 52.5 from 51.7 in November.

That beat a Reuters forecast for a decline to 50.4 and was the sixth month in a row that the reading was above the 50 mark that separates growth from contraction.

The flash PMI for activity in the services sector improved to 47.7 in December from 46.0 the previous month. A Reuters poll had predicted a drop to 44.0.

The flash PMI for manufacturing rose to 58.6 from 57.8 in November, beating a forecast for a drop to 56.4. The reading was the highest in nearly three years.

The stronger-than-expected PMI figures suggest the German economy ended the final quarter of the year on a surprisingly solid footing.

Economists have warned that Germany’s decision to tighten its second coronavirus lockdown increased the risk of another recession in Europe’s largest economy.

IHS Markit’s Phil Smith said the survey showed the economy still on a stable platform, at least up until the middle of the month, with the flash data collected from Dec. 4-15.

“However, the impending harder lockdown threatens to put paid to some of the resilience we’ve seen so far, with more sectors set to be impacted by the new tougher virus containment measures,” Smith added.

Nonetheless, German manufacturers and their service sector counterparts are positive about the outlook for 2021 in light of the expected rollout of vaccines, he said.

(Reporting by Michael Nienaber, Editing by Catherine Evans)