© Reuters. FILE PHOTO: The skyline with its financial district is photographed during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach
BERLIN (Reuters) -Pressure on the German economy eased further in January as inflation slowed and businesses looked to the new year with optimism, a preliminary survey showed on Tuesday, although sentiment was still shy of predicting a return to growth.
S&P Global (NYSE:)’s flash composite Purchasing Managers’ Index (PMI), which tracks both the manufacturing and services sectors that together account for more than two-thirds of Germany’s economy, rose for the third consecutive month, to 49.7 in January from 49.0 in December.
A Reuters poll of analysts had pointed to a reading of 49.6.
January marked the seventh consecutive month in which the indicator lagged below the 50 level, which separates growth from contraction.
While the euro zone composite PMI returned to growth territory in January, rising to 50.2 from 49.3 in December, France and Germany remained below 50.
“The composite PMI for Germany, which due to its large manufacturing sector initially suffered more from the gas supply shock, overtook France’s in January on the back of strong services activity,” Berenberg’s economist Salomon Fiedler said.
January’s flash PMI “lends support to the notion that a recession in the euro zone’s largest economy is by no means a foregone conclusion,” said Phil Smith, economics associate director at S&P Global Market Intelligence.
“Alongside easing supply-chain strains, January’s preliminary survey also pointed to a continued slowdown in rates of inflation,” he added.
Separately, the manufacturing index for Germany dipped slightly to 47.0 from a final reading of 47.1 in December. The consensus forecast was for 47.9.
The services index improved to 50.4 from a final reading of 49.2 in December, beating the consensus forecast for 49.6.