A sudden turn for the worse across German companies should clinch an interest rate cut from the European Central Bank next week, or in June at the latest.
That’s because the latest PMI surveys, which have a decent correlation with economic growth, suggest the German economy shifted back into reverse this month, against the expectations of economists.
And the one thing the ECB’s Governing Council never allows to pass is any sign that Germany, Europe’s No.1 economy, is floundering.
The German composite PMI has only ever crossed under the 50 point mark that separates growth and contraction on four occasions since Sept. 2008, including Tuesday.
On the previous three occasions, an ECB rate cut followed immediately after publication of the final data, or the month after.