German PMI data falls to new lows in over two years, EUR/USD plunges below 0.9800

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Purchasing Managers Index German manufacturing (PMI) has fallen eight tenths in the preliminary reading for September, standing at 48.3 compared to 49.1 points in August, matching market expectations. This is the fourth consecutive month of falls for the indicator and the third in contraction territory. In addition, it is the lowest result seen in 27 months, since June 2020.

The Services PMI of Markit Economics has dropped to 45.4 in September from 47.4 in August, disappointing the 47.2 expected by market consensus. This is the fifth month of falls for the indicator and the third in contraction. The September figure is the lowest recorded in 28 months, since May 2020.

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Phil SmithAssociate Director of Economics at S&P Global Market Intelligence, commented on the PMI data: “The German economy is poised to contract in the third quarter, and with the PMI showing the slowdown in September and the survey’s forward-looking indicators also deteriorating, the outlook for the fourth quarter does not look good either“.

“The deepening of the decline in business activity in September was led by the services sectorwhich has seen demand weaken rapidly as clients cut spending due to tight budgets and increased uncertainty about the outlook.

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“Although constraints on manufacturing output due to material shortages appear to have eased somewhat, translating into a smaller drop in production levels in September, goods producers, like their counterparts in the services, are increasingly concerned about activity in the coming months, as the energy crisis fuels recession fears“.

“Just when it looked like underlying inflationary pressures might ease, a further spike in energy prices has seen business input costs rise at a faster pace for the first time in five months, in turn triggering a new acceleration of the average prices applied to goods and services.”

EUR/USD reaction

EUR/USD has tumbled after the release, falling nearly 45 pips and breaking the 0.9800 zone to make new 20-year lows at 0.9767. At time of writing, the pair is trading above 0.9774, shedding 0.58% on the day.

Source: Fx Street

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