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In its economic report from yesterday, the HIS Markit has released the most recent adjustments to the Purchasing Managers’ Index® measuring the current production trends in the German economy for the month of July. The findings of the report demonstrate that the while the manufacturing output has reached a 2-month high, the services activity index is at a 7-month low, all of which confirms the recent speculations that the German economy is very close to a recession.
“The German economy continued to underperform in August, latest flash PMI data showed. Growth of service sector business activity was again countered by a marked fall in goods production, while overall job creation slipped to a five-year low. […] Robust growth of service sector business activity kept the headline index above the 50.0 no-change mark, although it was a slower (but still marked) decrease in manufacturing output that was behind the slightly improved reading. As such, August also saw the IHS Markit Flash Germany Manufacturing PMI tick up from 43.2 in July to 43.6.” [source]
Thus, investors were given little incentives to be hopeful of the near-term future of the German economy, as many of them fear that Donald Trump's recent remarks stating that the EU has been abusing the US in terms of unfair trade practices far more than China has, could be an early indication that the US president might be looking to start imposing additional trading tariffs on European products as well. This risk of more tariffs could potentially pressure local manufacturing as well as other sectors of the broader economy and tip the entire bloc towards a new recession.
The German Stocks Index – the DAX – contracted with 0.47 per cent during yesterday's trading session following the release of the manufacturing data. Initially, the price action managed to reach 11853.14, which is a significant resistance level that was last broken on August 2nd, however, the price then reversed itself. Currently, the price appears to be consolidating near that resistance level in anticipation of further developments in the global economic environment.
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