German Private Sector PMIs Impress, with the Services PMI Up from 53.2 to 53.9 in May

The German economy was in the spotlight on Thursday (May 23), with preliminary private sector PMIs in focus.

German Private Sector PMIs and the ECB

In May, the German HCOB Services PMI rose from 53.2 to an 11-month high of 53.9. Furthermore, the HCOB Manufacturing PMI advanced from 42.5 to a four-month high of 45.4. Economists forecast PMIs of 53.5 and 43.1, respectively.

As a result, the German HCOB Composite PMI increased from 50.6 to a 12-month high of 52.2. Economists expected a Composite PMI of 51.0.

According to the preliminary survey,

• The services sector continued to drive growth across the private sector.
• The private sector saw total inflows of new business for the first time in over 12 months.
• New orders in the manufacturing sector saw the least marked rate of decline in over two years.
• Service sector firms created jobs at a more marked pace.
• Business sentiment improved across the manufacturing and services sectors, rising to the highest since February 2022.
• Operating costs across the services sector rose at the softest rate in three years while output prices trended higher.
• Across the private sector, input cost inflation eased to a six-month low.

ECB Monetary Policy: Impact Analysis

The HCOB Services PMI will likely draw the attention of the ECB amidst rising investor bets on a June ECB rate cut. Service sector activity and input price trends remain focal points for the ECB. Softer input price pressures could fuel investor expectations of post-June ECB rate cuts.

EUR/USD Reaction to German Private Sector PMIs

Before the private sector PMI data from Germany, the EUR/USD climbed to a high of $1.08325 before falling to a low of $1.08123.

In response to the German private sector PMIs, the EUR/USD jumped from $1.08131 to a high of $1.08343.

On Thursday, May 23, the EUR/USD was up 0.06% to $1.08290.

Up Next

Later this morning, preliminary private sector PMIs for the Eurozone will also attract investor interest. Economists forecast the HCOB Services PMI to increase from 53.3 to 53.5 and the HCOB Manufacturing PMI to rise from 45.7 to 46.2 in May.

Beyond the headline numbers, input and output price trends, job creation rates, and new orders need consideration.

US private sector PMI and jobless claims data will also need consideration. Economists expect the S&P Global Services PMI to hold steady at 51.3.

Furthermore, economists forecast the S&P Global Manufacturing PMI to remain at 50.0. The focus will likely be on the services sector. The services sector accounts for over 70% of the US economy. Moreover, housing services inflation is a focal point for the Fed.

While the Services PMI will likely impact sentiment toward the Fed rate path, US jobless claims could move the dial. Economists expect initial jobless claims to fall from 222k to 220k in the week ending May 18.