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German Factory Growth at 15-Month Low

German Factory Growth at 15-Month Low
German Factory Growth at 15-Month Low

German manufacturing expanded at the slowest pace in 15 months in September as new orders fell, signaling uneven momentum in Europe’s largest economy.

Markit Economics said its Purchasing Managers Index fell to 50.3 from 51.4 in August, the weakest since June 2013. Economists surveyed by Bloomberg News predicted a drop to 51.2. A gauge of services rose to 55.4 from 54.9, offsetting the drop in factory output and pushing the composite index up to 54 from 53.7. A reading above 50 indicates expansion.

The data add to the uncertainty facing the German economy. While gross domestic product unexpectedly contracted in the second quarter, the Bundesbank said Tuesday that positive July data had dispelled fears of an abrupt end to the country’s upturn. In June, Germany’s central bank predicted growth of 1.9 percent this year and 2 percent in 2015.

“Weak manufacturing data have become one of the most conspicuous features of the fragility of a broad-based recovery,” said Oliver Kolodseike, an economist at Markit. The data “paint a mixed picture of the health of the German economy at the end of the third quarter.”

A gauge of new orders at factories contracted for the first time since June 2013, falling to 48.8 from 51.1, the data showed.

Confidence in Europe’s largest economy has declined in recent months as tensions with Russia threatened trade and a slowing recovery in the euro-area dimmed export prospects. European Central Bank President Mario Draghi said that policy makers can implement more stimulus if required to stave off the threat of deflation in the euro area.

Risks to growth in the currency bloc “are clearly on the downside,” Draghi told lawmakers in Brussels. Recent indicators gave no indication that the sharp decline in economic activity in the region has stopped, he said.

Data earlier today showed a deteriorating outlook in France, the euro area’s second largest economy. A similar gauge for the euro area was unchanged at 52.5.

Financialtribune.com