• German Manufacturing PMI arrives at 49.8 in August vs. 48.2 expected.
• Services PMI in Germany contracts to 48.2 in August vs. 49.0 expected.
• EUR/USD rebounds towards 0.9950 on mixed German PMIs.

The German manufacturing and services sectors remained in contraction in August as the downturn deepened in the private sector economy, the preliminary manufacturing activity report from S&P Global/BME research showed this Tuesday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in at 49.8 this month vs. 48.2 expected and 49.3 prior. The index jumped to two-month highs.

Meanwhile, Services PMI dropped from 49.7 booked previously to 48.2 in August as against the 49.0 estimated. The PMI hit the lowest level in 18 months.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 47.6 in August vs. 47.4 expected and July’s 48.1. The gauge reached 26-month troughs.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“The PMI data paint a bleak picture of the German economy midway through the third quarter, showing a deepening decline in private sector business activity. Continued weakness in manufacturing is being compounded by a slowdown in the service sector, with surveyed businesses reporting a growing strain on demand from high inflation and increased interest rates.”

“The slowdown in the economy is increasingly taking a toll on firms’ hiring activity, with employment growth easing to its weakest for almost a year-and-a-half in August. A first fall in backlogs of work for more than two years points to capacity pressures across Germany’s private sector economy starting to ease and represents a downside risk to job creation going forward.”

FX implications

EUR/USD staged a decent comeback from 0.9900 towards 0.9935 on the German manufacturing upside surprise, as it eased fears of an imminent recession. The spot was last seen trading at 0.9925, still down 0.15% on the day.