German manufacturing sector rebounds in Oct after Sept dip: PMI

[BERLIN] German factory activity rebounded in October after shrinking slightly in September for the first time in over a year, although there are signs of weak domestic demand in Europe's largest economy, a survey showed on Monday.

Markit's Purchasing Manager's Index (PMI) for the manufacturing sector, which accounts for about a fifth of the economy, climbed to 51.4 from 49.9 in September, bouncing back above the 50 mark that denotes growth. The final figure was slightly below the flash reading of 51.8.

Output growth accelerated in October and firms added the most staff in nearly three years.

But the survey also showed new business falling for a second month, albeit very slightly, as Russian sanctions and a general economic slowdown weighed on demand, Markit economist Oliver Kolodseike said. "Worryingly, the drop in new work was driven by weakening domestic demand."

"Overall, the data send mixed signals about the health of Germany's manufacturing sector and it is too early to say whether the sector will be able to sustain growth in the fourth quarter," he added.

New export contracts rose very slightly. Input prices fell at their sharpest rate in six months, driven down by lower crude oil and raw material costs, while output prices increased only marginally, suggesting inflationary pressures are limited.

The German economy had a strong start to 2014 but contracted in the second quarter. Fears about a recession are rife, partly due to euro zone weakness and a depressed investment climate caused by political crises abroad. Third-quarter gross domestic product figures are due out on Nov 14.

REUTERS