Germany’s economic outlook has worsened with the latest PMI data showing continued weakness in both manufacturing and services. PMI Manufacturing fell from 42.4 to 40.3 in September, marking a 12-month low. PMI Services dropped to from 51.2 to 50.6, a six-month low. PMI Composite PMI declined from 48.4 to 47.2, a seven-month low.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented on the deepening downturn in the manufacturing sector, saying, “The hope for an early recovery has evaporated,” as output plunged at its fastest rate in a year, with new orders collapsing. The sector’s troubles have prompted significant layoffs, with several major automotive suppliers announcing job cuts.
These concerning trends in manufacturing are now beginning to affect Germany’s traditionally robust services sector. De la Rubia warned that activity growth among service providers has slowed for four consecutive months, edging toward stagnation.
A technical recession appears to be “baked in”. According to HCOB’s Nowcast, Germany’s economy is expected to shrink by -0.2% in Q3, following a -0.1% contraction in Q2.
