German business activity contracts in August, PMI shows

GERMAN business activity contracted in August for a second consecutive month and by more than expected, a preliminary survey showed on Thursday (Aug 22).

The HCOB German flash composite Purchasing Managers’ Index, compiled by S&P Global, fell to 48.5 in August from 49.1 in July, below the 49.2 forecast in a Reuters poll.

The survey suggests Germany’s economy, which unexpectedly contracted by 0.1 per cent in the second quarter, has not picked up pace going into the second half of the year. Any reading below 50 indicates contraction.

The composite index tracks the services and manufacturing sectors that together account for more than two-thirds of the eurozone’s largest economy.

The services sector index eased in August to 51.4 from 52.5 in July, but remained in expansion territory. Analysts polled by Reuters expected the index to fall less steeply to 52.3.

Manufacturing remained mired in a downturn, with the index tumbling to 42.1 from 43.2 in July, wrongfooting analysts who had expected it to rise to 43.5.

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“The recession in Germany’s manufacturing sector deepened in August, with no recovery in sight,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noting weakness in the manufacturing sector was starting to spill over into the services sector.

“The odds of a second straight quarter of negative growth have gone up, meaning we might be back to talking about a recession in Germany soon,” he added. REUTERS