German Factories See Record Growth as French Economy Steadies

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German manufacturing increased at a record pace in March, leading an economic revival in Europe that saw French activity stabilize.

Purchasing managers’ indexes from the euro area’s two largest economies beat economists’ estimates as orders rose strongly and confidence that pandemic restrictions will fade eventually bolstered hiring. In Germany, the survey results are “hinting at the prospect of a better than expected economic performance in the first quarter,” said IHS Markit economist Phil Smith.

German Factories See Record Growth as French Economy Steadies

Optimism in the private sector contrasts with the Bundesbank’s assessment of the economy. The institution predicts a sharp contraction in the three months through March, expressing particular concern about services that have struggled with restrictions.

IHS Markit’s report showed the German services sector saw a “mini revival,” recording its first growth in six months, after the government lifted some lockdown rules. After surging infections forced Chancellor Angela Merkel’s administration to extend restrictions instead of easing them further, short-term risks have increased.

MarchFebruary
German manufacturing PMI66.6 (est. 60.5)60.7
German services PMI50.8 (est. 46.5)45.7
GERMAN COMPOSITE PMI56.8 (est. 51.6)51.1
French manufacturing PMI58.8 (est. 56.3)56.1
French services PMI47.8 (est. 45.5)45.6
FRENCH COMPOSITE PMI49.5 (est. 47.2)47.0

“Businesses remain highly optimistic about the outlook over the coming year, with many pinning their hopes on progress in the vaccine rollout,” Smith said about the latest trends in Germany. “However, with the ‘emergency break’ restrictions coming into effect in April to stem a third wave of infections, the immediate outlook looks less promising.”

The risk of setbacks remains tangible in France as well, where several regions including Paris have been in a new lockdown since Saturday.

Supply constraints are another headache threatening to undermine the recovery. Input costs surged in both countries, squeezing margins and forcing companies to raise prices.

©2021 Bloomberg L.P.

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