World Economy

German Manufacturing Returns to Growth

German Manufacturing Returns to GrowthGerman Manufacturing Returns to Growth

A boost in new orders helped Germany’s manufacturing sector return to growth in December, a survey showed on Friday, fanning hopes for a modest recovery in Europe’s largest economy.

Markit’s Purchasing Manager’s Index (PMI) for the manufacturing sector, which accounts for about a fifth of the economy, rose to 51.2, the same as a flash reading, from 49.5 in November. The November figure was the lowest since mid-2013 and below the 50.0 threshold dividing growth from contraction, Reuters reported.

New orders picked up, albeit modestly, after three months of declines, with firms reporting growth in export business and orders from the home market.

“Some relief was offered by December’s survey results, as the PMI edged back into expansion territory and new orders returned to growth,” said Markit economist Oliver Kolodseike.

“However, it is too early to say whether or not the manufacturing economy has entered the fast lane again or whether the uptick in the data is just a temporary bright spot.

“With oil prices at levels not seen since 2009, input costs fell further in December,” he added. “The accelerated drop in input prices is a positive development for manufacturers, but adds to fears of wider disinflationary pressures.”

 Avoids Recession

A meager growth rate of 0.1 percent in the third quarter helped Germany skirt a recession after a contraction of 0.1 percent in April-June.

Strong employment, rising wages and low interest rates are helping prop up the economy, which has suffered from uncertainty over the West’s confrontation with Russia over Ukraine and weakness in some euro zone partners.

German business morale rose in December for the second month running, according to the closely-watched Ifo index, suggesting the economy is on course to pick up in the fourth quarter.

As the German manufacturing sector returned to growth, the French manufacturing sector contracted more than initially estimated to a four-month low in December.

The French manufacturing sector continued to contract in December. The PMI dropped to 47.5 in December from 48.4 in November.

The score was also below the flash estimate of 47.9 and marked the sharpest deterioration since August.

French manufacturing output declined at the fastest pace in five months and new orders decreased further in December. The rate of job shedding was the fastest since August.