Mubasher: Activity in the German private sector shrank in September for the first time since six years and a half, led by downturn in goods production and the expansion slowdown of the services business, a business survey showed on Monday.
Germany’s flash composite output index came in at 49.1 in September, compared to a final reading of 51.7 in August, IHS Markit's purchasing managers’ index (PMI) data showed.
While September’s preliminary estimate was the first reading below the 50-mark, it reflected the steepest fall rate since October 2012.
“The economy is limping towards the final quarter of the year and, on its current trajectory, might not see any growth before the end of 2019,” IHS Markit’s principal economist Phil Smith said.
The headline IHS Markit flash Germany manufacturing PMI posted an estimate of 41.4, dropping from of 43.5 in the preceding month. This was the sharpest drop in factory business conditions since the troughs of the global financial crisis.
Moreover, the flash services PMI came in at 52.5, inching down from the prior month’s final estimate of 54.8. This marked the lowest level seen since nine months.
Growth of the services sector lost momentum sharply to one the weakest rates observed during the last three years.
Demand continued to stutter, with new business dropping for the third month running and at the fastest pace since seven years. This came against a backdrop of hesitant clients and waning investment inflows due to uncertainty and worries about the economic outlook.
This was mainly ascribed to the stumble of manufacturing orders, which was the sharpest in over a decade, even with a notable drop in new business placed with services firms.
“All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009,” Smith said.
Moreover, businesses pointed to a decline of work backlogs as they finished orders at a faster pace than they received them.
In addition, low business morale also dragged job creation, as the outlook of output during the year ahead remained stuck in negative territory, even with a slight uptick from August’s 81-month trough.
Price pressures eased further across the private sector, as average charges rose at the slowest pace since August 2016.
By 8:00 am GMT, the EUR/USD pair fell by 0.40% to $1.10973.
