Manufacturing recovery drives cautious optimism
Germany’s business activity showed renewed signs of life in June, led by a strong rebound in manufacturing, according to flash PMI data released Monday by S&P Global and Hamburg Commercial Bank (HCOB). The composite PMI output index climbed to 50.4, up from 48.5 in May, signaling the first expansion in economic activity since April and surpassing Reuters’ forecast of 49.0.
The increase was fueled by a surge in new manufacturing orders, which rose at the fastest pace in over three years, hinting at a possible turnaround for the struggling sector.
Manufacturing nears expansion zone
Germany’s manufacturing PMI rose to 49.0 in June from 48.3, consistent with analysts’ expectations. While still technically in contraction territory, the reading reflects significant improvement and is edging closer to the 50 threshold that separates growth from contraction.
“It looks like Germany’s manufacturing sector might finally be turning a corner,” said Cyrus de la Rubia, chief economist at HCOB.
Services sector contraction slows
Though the services sector continued to shrink, it did so at a much slower rate. The services PMI rose to 49.4 from 47.1 in May, exceeding forecasts for 47.5. This easing of the contraction suggests improving sentiment among service providers and supports a more balanced recovery outlook.
Outlook brightens for 2025
Earlier this month, four major German economic institutes revised their 2025 forecasts upward, projecting growth after two years of contraction. June’s PMI figures reinforce hopes that Europe’s largest economy may be on track to avoid a rare third year of decline.
