Germany: PMI manufacturing weakens in March to 34-month lows

The index Germany’s manufacturing PMI has fallen in the preliminary reading for March to 44.4 points from 46.3 in February, its lowest figure since May 2020, in the midst of the first wave of the coronavirus pandemic. The result disappoints market expectations, which predicted an increase to 47 points.

The drop in manufacturing purchasing costs was partly due to a rebalancing of supply and demand for materials, as falling orders and the easing of supply bottlenecks led goods producers to reduce their purchase levels and reduce stocks of inputs. Lower buying stocks contributed to another below 50 reading on Germany’s manufacturing PMI in March.

Finally, the March survey indicated a slight weakening in general business expectations. The result reflected less optimism among manufacturers, who continued to highlight their concern about falling demand.

He Services PMI, on the other hand, has strengthened three points, rising to 53.9 in March compared to 50.9 the previous month, exceeding the 51 estimated by consensus. This is the best reading recorded by the indicator in ten months.

Phil Smith, associate director of economics at S&P Global Market Intelligence, commented: “The German economy took another small step in the right direction in March, according to the latest preliminary PMI data. Business activity increased for the second consecutive month and the pace of growth picked up, although it remained modest overall due to continued weakness in the manufacturing sector.”

“He manufacturing sector lacks momentum at the moment, with new orders declining amid a cautious period among customers and excessive inventory levels. Unsurprisingly, growth expectations in the sector remain low.”

EUR/USD reaction

EUR/USD has continued to extend its slide below 1.0800 (started prior to the data) and has bottomed out at 1.0768, new two-day low. At time of writing, the pair is trading above 1.0773, losing 0.53% daily.