In France, private sector production levels remained unchanged in April, indicating stabilization at the start of the second quarter. Activity in the service sector increased for the first time since May 2023, while manufacturing production decreased at an accelerating pace. The number of new businesses founded continued to decrease, but to the weakest extent in a year, and exports had a sharper negative impact on total sales. Nevertheless, employment in the private sector rose by the largest amount since July 2023.
Inflationary pressure intensified across France, with input costs and producer prices accelerating to five- and three-month highs, respectively.
The HCOB Flash France Composite BMI Output Index showed its highest value since May 2023, rising from 48.3 in March to 49.9.
In Germany, the private sector returned to growth at the start of the second quarter, driven by solid growth in the services sector. Manufacturing continued to shrink, but the rate of decline in factory output moderated. The confidence of commodity producers regarding the outlook reached the highest level in the past year. Both input cost and output price inflation rose, but were registered roughly in line with their long-term averages.
New industrial orders show the biggest drop in five months.
Total new deals continued to decline, albeit at the slowest rate in nearly a year. Falling export activity continued to significantly worsen the situation, even though the rate of decline moderated to the weakest in 12 months. Due to the German industrial structure, this shows a decline in the order stock of the most important vehicle manufacturing component, which is also a bad sign for the Hungarian economy.
“In April, production declined less compared to March, and we are seeing somewhat more optimism about future production. However, the steeper decline in incoming orders, which is the most significant decline in the last five months, is less encouraging. In addition, faster delivery times are further evidence of weakening demand. In this context, there are still no indications that the cautious turn observed in the global inventory cycle has reached Germany,” commented Cyrus de la Rubia, chief economist of the Hamburg Commercial Bank, on the data.
The HCOB flash German composite PMI output index again breached the unchanged threshold of 50.0 for the first time in ten months in April, indicating a modest expansion in private sector business activity. The upswing was therefore mainly driven by the revival of service business activity, which produced the strongest growth since June 2023. This indicates that household consumption is picking up.
Demand conditions showed opposite trends at the sectoral level in Germany. In the service sector, the number of new contracts rose for the first time in ten months, while in the manufacturing sector a sharp and accelerating decline in the inflow of new jobs was registered. Employment also showed a duality: the number of people employed in the service sector increased, while jobs in the manufacturing industry continued to decrease.
In Germany, business confidence fell slightly as optimism in the services sector cooled from a 25-month high in March. Price pressures picked up slightly, with input cost inflation rising from a three-month low in March and output prices rising at a pace that was virtually in line with the series’ long-term average.
In summary, the French economy stabilized in April, with the services sector returning to growth, while manufacturing continues to struggle. In Germany, the private sector returned to growth, driven by strong growth in the service sector, even as manufacturing continued to shrink. Inflationary pressure increased in France, while price pressure increased only slightly in Germany.
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