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German Manufactures Near Stagnation
World Economy

German Manufactures Near Stagnation

The German economy took a hit this month from weak global demand, with a manufacturing gauge dropping to a 15-month low.

Markit Economics said its factory Purchasing Managers Index fell to 50.2, barely above the key 50 level, from 52.3 in January. A services gauge improved slightly, but a composite measure declined to the lowest since July, Bloomberg reported.

“The German economy appears to be in the midst of a slowdown,” said Oliver Kolodseike, an economist at Markit. Manufacturing is “near stagnation,” he said.

While Germany weathered global headwinds through 2015, maintaining its pace of expansion in the fourth quarter, business confidence has weakened recently. China’s slowdown is weighing on exports while the equity selloff this year threatens a fragile recovery in the eurozone, the country’s largest trading partner.

The Organization for Economic Cooperation and Development cut its global growth forecast last week and said both Germany and the euro region will expand less this year than previously estimated.

Markit said the slowdown in German output led to increased caution on hiring, with the rate of job creation at the weakest in almost a year.

France’s composite Purchasing Managers Index slipped to 49.8 from 50.2 in January. In the 19-nation eurozone, both the factory and services measures probably declined this month, according to surveys of economists. Markit will publish those numbers later Monday.

Pantheon Macroeconomics said, new services business is growing briskly, but slowed in manufacturing as export orders weakened. Euro weakness relative to the dollar and pound is not helping eurozone manufacturers to the same extent as last year, and the recent fall in the Chinese yuan has added to the pressure.

As a result, manufacturing employment fell, while it continued to rise in the services sector, albeit at a more moderate pace compared to recent months.

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