Germany pulls out of slump with first growth in months

Bloomberg

Germany took a step forward in its recovery from the coronavirus slump, with a key measure of activity showing growth for the first time in five months.
IHS Markit’s composite Purchasing Managers Index (PMI) jumped to 55.5 in July from 47 in June. The figure was better than economists had predicted, and puts the gauge above the key 50 level that divides expansion from contraction.
The reading keeps Europe’s largest economy heading in the right direction after a devastating downturn in the second quarter during the virus lockdowns. Figures next week are forecast to show a contraction of about 9% in the three months through June. That will reflect the depth of the slump, with surveys pointing to an improvement more recently.
The Markit report showed the pickup in July was led by services, though manufacturers reported a “solid” rise in export sales. Despite that, factory employment fell, with 30% of manufacturers reporting a drop in staff numbers.
“For an economy that is steered so much by exports, it was encouraging to see manufacturers reporting a notable upturn in sales abroad,” said IHS market economist Phil Smith. “However, one of the main concerns remains the labour market, and the ongoing cuts to manufacturing jobs in particular.”
The PMI also improved in France. A report for the euro area is forecast to show an increase to 51.1 in July from 48.5.

Germany: Brexit talks failure is ‘inevitable’
A top German industry official said the failure of talks between the European Union and the UK over a future relationship is “almost inevitable” and warned of “economic disaster.”
There are too many outstanding issues for them to be resolved in time and companies on both sides of the English Channel should “prepare for bilateral trade without an agreement under WTO rules,” Joachim Lang, managing director of Germany’s BDI industry lobby, said in a statement.
“German industry does not expect the UK to complete the infrastructure for cross-border trade in time,” Lang added. “Companies face the threat of new tariffs, additional bureaucracy and an economic disaster.”
The remarks add to growing pessimism in Europe’s largest economy that a deal can be reached by the end of the year. A deputy German foreign minister, Michael Roth, this month accused the UK of failing to live up to commitments it made in last year’s Brexit accord.
Michel Barnier, the EU’s chief negotiator, said this week that “big differences” remain between the two sides after talks in London — and that a deal is “unlikely” if the British government doesn’t back away from its red lines.
Officials gave a softer impression in private, however, signalling some progress toward agreement in key areas.
But Lang, whose organisation represents around 100,000 businesses that employ some 8 million workers, echoed comments by Roth about what he suggested is UK negotiators’ backsliding.
“London has repeatedly deviated from the political declaration on key issues, such as future competition regulations,” the BDI chief said. “It’s imperative for the German government and the EU to join forces and give full focus to the necessary emergency measures.”