Manufacturing recession worsens in Germany

2 Apr 19

Uncertainties over Brexit are forcing activity in Germany’s manufacturing sector to contract at its fastest rate since July 2012.

A survey indicated that risks linked to Britain’s possible departure from the European Union without a deal as well as a weakening global economy and trade disputes are straining factories.

Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which was published yesterday, fell to an 80-month low reading of 44.1, down from 47.6 in February, Reuters reported.

“Both total new orders and export sales are now falling at rates not seen since the global financial crisis, with more and more firms reporting lower demand linked to Brexit, trade uncertainty, troubles in the automotive industry and generally softer global demand,” said Phil Smith of IHS Markit.

Manufacturing accounts for about a fifth of the German economy and the news will be greeted with dismay by policymakers concerned about the impact upon public budgets.

It was the third successive month that the Markit PMI has been below the 50.0 mark that separates growth from contraction, with new orders posting their steepest fall since April 2009.

Weakening exports have translated into a slowdown in Europe’s biggest economy, which last year posted its lowest growth rate since 2013.

The economy has been relying on consumption for growth, supported by a robust labour market, rising wages and low interest rates.

Smith said: “Manufacturing output fell markedly and at the fastest rate since 2012, with the consumer goods sector joining intermediate and capital goods producers in contraction.

“The sustained solid growth in employment prior to March had been the sector’s one remaining bright spot, but the latest survey indicated a fall in jobs for the first time in three years amid reports from a number of firms that some temporary contracts weren’t being renewed.”

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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