According to the report from IHS Markit, the recovery in Germany’s private sector economy gained momentum in June, with the further easing of COVID-19 restrictions and release of pent-up demand leading to a sharp and accelerated rise in business activity. However, the recovery in output levels was accompanied by a further increase in price pressures, with rates of inflation in both input costs and output prices accelerating to new record highs.

The headline Flash Germany PMI Composite Output Index registered 60.4 in June, up sharply from 56.2 in May and its highest reading since March 2011. The upturn reflected improved performances across both monitored sectors. In services, business activity rose at the quickest for more than ten years (index at 58.1), with many customer-facing businesses buoyed by the easing of virus containment measures. Manufacturing output growth also accelerated (index at 65.1), after having slowed in each of the previous two months. This coincided with a stronger expansion in factory new orders as well as a slight fall in the number of businesses reporting longer lead-times on materials and components (although reports of delays were still among the highest in the series history). 

Businesses reported stronger optimism towards the year-ahead outlook for activity in June. Expectations among services firms rose particularly sharply, reaching the highest since February 2000, reflecting progress in vaccinations and growing confidence regarding an eventual end to the pandemic. Nevertheless, the degree of optimism was still marginally stronger in manufacturing, where it picked up to a new series high (data on manufacturing expectations were first collected in July 2012).