Germany August final services PMI 47.3 vs 47.3 prelim

<ul><li>Prior 52.3</li><li>Composite PMI 44.6 vs 44.7 prelim</li><li>Prior 48.5</li></ul><p>Weaker demand conditions continue to weigh on overall business activity as the final estimates reaffirm a sustained downturn in the German economy in Q3. Price pressures in the services sector continue to stay elevated, so that is a bit of a concerning point. HCOB notes that:</p><p>“There is something odd occurring in the German service economy: activity is slowing down, but prices are revving up.
Usually, downbeat activity goes hand in hand with less price pressure. One reason for this puzzle is most probably that
labour dependent services are feeling the heat of major wage increases. The latter kick in with some delay as a result of
rolling new longer term collective negotiations. As roughly two-thirds of Germany's economy is tied to services, the ECB
authorities may fear that inflationary pressure in the eurozone’s biggest economy will remain high, threatening their goal to
bring down overall inflation to 2%. The latest inflation figures for the eurozone confirm this.
</p><p>“There was this final shot of hope, that the service sector may continue to provide some stabilisation to the overall economy.
This optimism proved short-lived as the sector contracted at a rather substantial rate and for the first time this year. This bad
news has contributed to a downward revision of our GDP nowcast for the third quarter, which stands now at around -0.8%.
</p><p>“Workforce expansion has practically stalled as backlogs of work disappeared at a quicker rate. We might see a few people
losing their jobs in the months ahead. However, we would not expect companies to turn to very aggressive staff downsizing
as the ongoing labour shortage remains at the forefront of their minds.
</p><p>“Both input and output prices, where we saw less upward pressure as of lately, rose sharply and the former surprisingly
kicked into a higher gear this time. It signals that companies still have some power to pass higher costs on to consumers.
The loss in activity and in new business shows, however, that this comes at a cost.”</p>

This article was written by Justin Low at www.forexlive.com.