BERLIN (Reuters) – Business activity across Germany’s private sector dipped in March as output price inflation hit a new record high and the war in Ukraine impacted demand as well as supply chains, a survey showed on Monday.
However, the declines were smaller than expected as easing supply bottlenecks and fewer COVID restrictions allowed the German economy to start recovering before Russia’s invasion of Ukraine.
S&P Global’s flash services Purchasing Managers’ Index (PMI) dropped to 55.0 in March from 55.8 in February, which had been the highest reading since August. Analysts had on average predicted a bigger decline to 53.8 in a Reuters poll.
As a result, the composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, slipped to 54.6 in March from February’s six-month high of 55.6.
This was also less than analysts’ average forecast for a decline to 53.7.
The flash manufacturing PMI dropped to 57.6 from 58.4 in February, compared with analysts’ consensus forecast for a reading of 55.8.
“The flash PMI surveys point to a fair amount of resilience in activity in March, thanks in most part to the service sector, which has benefited from the easing of restrictions,” said Phil Smith, Economics Associate Director at IHS Markit.
However, manufacturing is starting to hurt overall growth as it has more exposure to supply chain disruptions and weaker exports due to sanctions imposed on Russia, Smith said, adding that rising COVID-19 cases in China further complicated the situation.
He said the war in Ukraine exacerbated the existing inflation pressures as surging commodity prices drove an unprecedented increase in businesses’ input costs.
The impact of the Ukraine war will probably hurt Germany’s economic growth over the rest of the year, the economist said.
(Reporting by Zuzanna Szymanska; Editing by Hugh Lawson)
