German Manufacturing Misses Market Forecasts

Preliminary data out of Germany has indicated that its manufacturing sector remained bearish over May, despite the country being one of the first globally to ease their lockdown rules. A reading of 36.8 by the Markit economics missed the 39.2 consensus and was slightly above last months record fall to 34.5.

A large number of manufacturers remain partially closed as they adjust processes to adhere to new government guidelines. Many others have taken advantage of the countries Kurzarbeit /short-time work  subsidies programme that enables workers to be laid-off temporarily but still receive up to 67% of their pre-crisis pay.

Supply chain challenges also continue to mount whilst global demand remains low, leading to fears of a more protracted economic recovery from the effects of Covid-19. The recent Euro strength followed hopes of a backdown from the “Frugal Four” (Austria, Denmark, Sweden and the Netherlands) who had previously been opposed to the latest round of stimulus packages announced by the European Central Bank.

Attentions now turn to the UK’s manufacturing PMI reading with the market anticipating a 4-point improvement on last months figure of 32.6. GBP has come under increasing pressure in recent days following ongoing Brexit tensions and the prospect of negative interest rates from the Bank of England.