German Manufacturing on the Mend

Following several months of weaker activity amid a troublesome environment for the export economy, German factory orders have experienced a significant uptick, driven in large part by domestic demand.  The figure climbed by 4.90% on month over month in October, marking the biggest jump since July of 2014.  Besides handedly beating expectations of 0.60% growth, the prior figure was also revised modestly higher, suggesting a better recovery in fundamentals.  The primary driver of the growth was domestic demand climbing by 6.30% while demand from outside the Eurozone rose by 3.90%.  However, one area of concern is orders within the Euro Area, with purchasing flat as the outlook for the aggregate remains shaky despite extremely accommodative monetary measures.  After a spectacular rally on Monday, the German DAX 30 equity benchmark is pulling back slightly following the factory report.

Data reported by the Institute of Supply Management on Monday highlighted the continued pickup in the US services sector, with the non-manufacturing purchasing managers’ index climbing to 57.2 during the month of November.  This is a significant increase over October’s 54.8 reading and marks the highest reading since October of 2015 alongside 88-consecutive months of growth in the index.  The main driver behind the improved results were stronger hiring and business activity.  However, despite the headline optimism, growth in new orders decelerated alongside prices, indicating some potential downward pressure on the index in the months to come.  The other services figure reported by Markit indicated that services growth has also tapered, falling to 54.6 from 54.7 in October.  Bolstered by positive sentiment, Dow futures closed at a new high on Monday, with prices correcting modestly since the reopening.