Dax recovers despite weak manufacturing data

Despite German manufacturing orders falling unexpectedly by -1.8% in August, according to Federal Statistical Office Destatis, German stock market index Dax improved gradually throughout the morning, rising by 0.35% as of noon CET, according to Deutsche Börse.

According to Destatis, new orders in manufacturing fell even before the VW scandal, it is the second month in a row that data deteriorated, largely due to a decline in demand from non-Eurozone countries.

Robert Smith, investment manager at Barings German Growth Trust comments on the outlook for the German economy: “While there has been some concern about the impact of a China slowdown on German exporters, our company research and the conversations we are having with corporate managers lead us to believe that such concern is disproportionate to the actual threat. We note that many German companies have expanded in China even amid the economic slowdown.”

Counteracting poor manufacturing orders were also relatively solid PMI figures, released by Markit yesterday. While business activity slowed down somewhat, from 54.9 to 54.1 basis points mom, the service and construction industry reported market improvements.

Oliver Kolodseike, economist at Markit said: “Germany’s service sector ended the third quarter on a solid footing, according to latest PMI results. Output continued to rise at a robust rate as service providers benefitted from increased demand. Some panellists also mentioned that the need to build shelters for refugees had led to higher activity. The results from the Services PMI come on the back of positive manufacturing numbers, suggesting that the upturn in Germany’s private sector remains broad-based. The data are consistent with moderate GDP growth in the third quarter.”

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