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  • German Manufacturing PMI arrives at 64.0 in May vs. 65.9 expected.
  • Services PMI in Germany expands to 52.8 in May vs. 52.0 expected.
  • EUR/USD remains unfazed around 1.2230 on mixed German PMIs.

The German manufacturing sector slowed its pace of expansion in May, the preliminary manufacturing activity report from IHS/Markit research showed this Friday.

The Manufacturing PMI in Eurozone’s no.1 economy stood at 64.0 this month vs. 65.9 expected and 66.2 prior. The index dropped to three-month lows.

Meanwhile, Services PMI expanded to 52.8 in May as against the previous month’s reading of 49.9 and 52.0 estimated. The index clinched ten-month tops.

The IHS Markit Flash Germany Composite Output Index rebounded to hit two-month highs, arriving at 56.2 in May vs. 57.1 expected and April’s 55.8.

Key comments from Phil Smith, Principal Economist at IHS Markit

“May saw a welcome pick-up in services activity across Germany, as firms reported a rise in demand across the sector for the first time since the retightening of lockdown measures last October. The improved performance in services comes at a crucial time, making up for a further loss of momentum in manufacturing due to worsening supply issues.”

“While the demand picture for manufacturing remains positive, we are getting more reports from businesses of supply shortages curbing production levels and weighing on new orders due to forced downtime at customers. On top of this, there is also the issue of an associated surge in costs, with supply shortages pushing up factory input prices in May at a rate that easily surpasses anything seen before in the manufacturing survey’s 25-year history. Inflationary pressures are increasingly spreading to services as well, pushing the overall measures of input costs and output prices both to record highs.”

FX implications

EUR/USD  ignores the mixed German Business PMIs, as it holds steady around 1.2230 on the data release. The spot hit a high of 1.2240 in the last hour.

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