German Economic Contraction Begins As Both Mfg And Services PMI Prints Miss Expectations

Another reason why Angela Merkel is furiously contemplated just how to kill the EUR next, was this morning's German manufacturing PMI which came at a far wear weaker than expected 55.3 (on expectations of 57.6). Same thing with the services PMI which missed a consensus reading of 57.0 to land at 54.6. Even Goldman's Dirk Schumacher who has long been screeching about the imminent second coming of the Sun King who will make all things well, is starting to realize that in the central bank FX game, economic outlooks now change intervention to intervention.

From Goldman Sachs:

September flash PMIs show another big decline. The manufacturing PMI came in at 55.3 after 58.2, while the services PMI declined to 54.6 after 57.2. The 'new orders' and 'new business' sub indices reported a similar decline as the headline figures. Moreover, export expectations declined to the lowest level since September last year (51.9 after 54.3). Note, however, that 'employment' edged higher in both manufacturing and services.

The September PMIs are signaling a further loss of momentum of the economy at the end of Q3, though the index level remains consistent with moderate growth. The fact that employment is still growing suggests that companies remain relatively optimistic about the medium-term outlook. We are forecasting German GDP growth to be at 0.4%qoq in Q3 and Q4. While business sentiment in July and August pointed to some upside risk to this forecast, the September PMIs are roughly consistent with this forecast.