The German manufacturing and services purchasing managers indexes are expected to fall further in March, confirming that the country remains in deep recession.
On Tuesday, Markit Economics will publish the advance estimates to the PMI figures for both manufacturing and services for March.
Currently, expectations are for the manufacturing index to fall back to the record low 32.0 from 32.1 in February. For services, economists and analysts expect the PMI to fall to an all-time low of 41.0 in March from February's 41.3 level.
In terms of all the high-frequency data, (the PMIs) suggest that Germany remains in deep recession at the moment, Moody's Economy.com senior economist Enam Ahmed said.
Commerzbank economists agree, and have revised down their forecasts for the German economy due to the bad first quarter of this year.
We expect that this first quarter will be reflected in the PMIs as well, Commerzbank economist Simon Junker said. We expect the PMIs, in particular the manufacturing PMI, to reach a new record low.
Currently, Junker forecasts the manufacturing PMI to fall to 31.5 in March. Activity in the services sector is also expected to have contracted at record speeds, as reflected in the services PMI falling to an all-time low of 39.0.
Still, the indicators have likely hit the trough, Junker said. After this month, we expect a very modest stabilization, both in real activity and reflected in the PMIs.
We will expect the PMIs to increase, but only slightly so in the next couple of months.
Economists at Danske Bank, despite the pessimistic consensus forecast, expect a small improvement in the manufacturing PMI to 32.5 for the month.
However, Danske Bank economist Frank Oland Hansen stressed that this improvement is more of a technical correction rather than a sign of a quick trend reversal.
Nevertheless, like Junker, Hansen feels that we're now at close to the bottom. While the PMI could slip further for a month or two, we should see a stabilization in the coming months.
Regarding services, Hansen expects the PMI to fall further to 40.5 in March. However, the economist added that contraction in the services sector is also likely to stabilize soon. We think that [the crisis] hit manufacturing particularly hard and services might be lagging a bit, Hansen said.
Thirty minutes after the release of the German indexes, Markit Economics will publish its advance estimates for the euro zone figures.
Ahead of the release, expectations are for the flash manufacturing PMI to have stabilized at 33.6, up a minor 0.1 point from February's 33.5 level. The services PMI is also expected to remain unchanged after slipping to an all-time low of 39.2 in February.
However, IDEAglobal economist Lorenzo Cella expects both figures to fall below expectations in the month. Currently, he expects the manufacturing PMI to deteriorate to 33.0, while the services PMI is forecast to slip to 38.0.
The manufacturing sector has been the most exposed to the current financial crisis, Cella said, noting the pronounced declines in both new orders and industrial production from the major euro zone economies.
Meanwhile, he said the strong decline in the services PMI suggests that the recessionary phase of the manufacturing sector is spilling over into the services sector.
The month of February has already provided some evidence of that, Cella said, pointing to the three-point fall in the services figure versus the 0.5 point fall in manufacturing.
We expect to find a confirmation of this trend in the March PMI figures, Cella said.
All in all, while the manufacturing PMI might not be far from its bottom, we still foresee a long way down for the services PMI.
By Todd Wailoo, firstname.lastname@example.org, edited by Ernest Hoffman, email@example.com