(Bloomberg) -- German private-sector output improved more than anticipated ahead of Sunday’s snap election as the manufacturing recession eased.
Most Read from Bloomberg
-
Trump Targets $128 Billion California High-Speed Rail Project
-
Sorry, Kids: Disney’s New York Headquarters Is for Grown-Ups
-
Trump Asserts Power Over NYC, Proclaims ‘Long Live the King’
S&P Global’s Composite Purchasing Managers’ Index for Europe’s largest economy advanced to 51 in February from 50.5 the previous month, data Friday showed. That kept it above the 50 threshold separating growth from contraction and was more than the 50.8 that analysts had expected.
“The economy seems to be back on a growth path, at least for the first two months of the year,” Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said in a statement. “Looking ahead, much of the mood will depend on the capability of the new to be elected government to signal stability and to take bold measures.”
The euro held an earlier drop after the German data, trading about 0.2% lower at $1.0476, as investors added to the extent of expected European Central Bank interest-rate cuts this year.
Money markets are pricing almost 80 basis points of easing compared with 74 basis points on Thursday. Bonds pared gains slightly, with the German 10-year yield four basis points lower at 2.50%.
The prospects for Germany’s economy remain subdued. After enduring two consecutive annual contractions, the weak growth forecast for 2025 is already facing headwinds from potential US trade tariffs, which could exacerbate the longstanding manufacturing slump.
This weekend’s election may offer the chance of an improvement, with conservative front-runner Friedrich Merz promising lower taxes and less regulation. Expectations of more business-friendly policies helped push investor confidence up by the most in two years in February.
A key question will be whether the next government overhauls Germany’s debt brake, a limit on state borrowing that’s increasingly seen as unfit for purpose given the country’s vast investment needs.
Trade levies from US President Donald Trump threaten to worsen cyclical weakness and structural difficulties like the cutoff of Russian energy supplies, over-regulation and a dearth of skilled workers.
Bundesbank President Joachim Nagel said this week that the country is particularly vulnerable to US protectionism and tariffs due to reliance on exports. His institution predicts growth of just 0.2% in 2025 and warns that another contraction is possible if Trump implements his plans.