German services recover, factories struggle – PMI

German services activity rose by the most in nearly a year in May, helped by a loosening of COVID-19 restrictions, while supply bottlenecks in manufacturing led to production problems at a growing number of factories, a survey showed on Friday.

IHS Markit’s flash Purchasing Managers’ Index (PMI) of activity in the services sector jumped to 52.8 from 49.9 in April. That beat a Reuters poll forecast of 52.0 and was the highest reading since last July.

“The improved performance in services comes at a crucial time, making up for a further loss of momentum in manufacturing due to worsening supply issues,” said Phil Smith at IHS Markit.

The flash PMI for manufacturing eased to 64.0 from 66.2 in the previous month. The figure came in weaker than expected, but was still well above the 50 mark which separates growth from contraction.

As a result, the preliminary composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, rose to 56.2 in May from 55.8 in the previous month.

While factories still enjoyed strong demand, more companies reported supply shortages curbing production and weighing on new orders due to forced downtime at customers, the survey showed.

The supply bottlenecks also pushed up factory input prices at a rate never seen before in the survey’s history, Smith said.

“Inflationary pressures are increasingly spreading to services as well, pushing the overall measures of input costs and output prices both to record highs,” he added.