Manufacturing PMI Exceeds Forecasts with Strongest Reading in 31 Months
Germany’s manufacturing sector showed a significant rebound in March, with the Flash Manufacturing PMI rising to 48.3, beating both the forecast of 47.1 and the prior reading of 46.5. According to HCOB and S&P Global data, this marks the highest level in 31 months and reflects a renewed uptick in production for the first time in nearly two years. The key driver was improved domestic demand, particularly from restocking efforts by German clients. Export orders, however, remained soft, registering slight declines for the second month in a row.
Services Sector Falls Short of Expectations
In contrast, the German Services PMI fell to 50.2 from 51.1 in February, missing expectations for a rise to 52.3. The sector barely remained in expansion territory and saw the sharpest drop in new business in over a year. Survey respondents pointed to increased client uncertainty and reduced willingness to commit to new contracts. While employment in services edged slightly higher, weaker pricing power and subdued demand are weighing on near-term growth potential.
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See all EUR/USD forecastsInflation Pressure Eases Across Sectors
Input and output prices in the services economy rose at the slowest pace in five months, while price trends in manufacturing were largely flat, following months of decline. The easing in inflation supports expectations that the ECB will remain patient on policy tightening, particularly with services activity cooling.
Business Confidence Recovers Despite Mixed Sectoral Signals
Both manufacturers and service providers reported improved business expectations for the year ahead, bolstered by optimism over increased public infrastructure investment. However, services firms remain less upbeat compared to industrial producers, who see potential upside from government stimulus.
Market Outlook: Bullish on German Manufacturing, Cautious on Services
With the Flash Manufacturing PMI surprising to the upside and signaling improving momentum, the short-term outlook is bullish for Germany’s industrial sector. However, the Services PMI miss and ongoing weakness in new business suggest traders should remain neutral to cautious on broader eurozone demand. Close monitoring of U.S. tariff developments and German fiscal policy execution will be critical for validating further upside in Q2.
