Germany Pulls Out of Deep Slump With First Growth in Months

(Bloomberg) -- Germany took a step forward in its recovery from the coronavirus slump, with a key measure of activity showing growth for the first time in five months.

IHS Markit’s composite Purchasing Managers Index jumped to 55.5 in July from 47 in June. The figure was better than economists had predicted, and puts the gauge above the key 50 level that divides expansion from contraction.

The reading keeps Europe’s largest economy heading in the right direction after a devastating downturn in the second quarter during the virus lockdowns. Figures next week are forecast to show a contraction of about 9% in the three months through June. That will reflect the depth of the slump, with surveys pointing to an improvement more recently.

The Markit report showed the pickup in July was led by services, though manufacturers reported a “solid” rise in export sales. Despite that, factory employment fell, with 30% of manufacturers reporting a drop in staff numbers.

“For an economy that is steered so much by exports, it was encouraging to see manufacturers reporting a notable upturn in sales abroad,” said IHS market economist Phil Smith. “However, one of the main concerns remains the labour market, and the ongoing cuts to manufacturing jobs in particular.”

The PMI also improved in France. A report for the euro area, due later Friday, is forecast to show an increase to 51.1 in July from 48.5.

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