Business activity in Germany shrank for the fourth month in a row, with a decline in the manufacturing sector accompanied by a renewed downturn in the services sector, indicating that a recession was already underway, according to Reuters.
The HCOB German Flash Composite Purchasing Managers’ Index (PMI) dropped to 45.8 in October from September’s 46.4, almost one point below economists’ forecasts. A number below the 50 level indicates a contraction in business activity.
The composite PMI tracks the service and manufacturing sectors, which jointly account for more than two-thirds of the German economy.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated that the drop in the composite PMI allowed to assume that “there is much to suggest that a recession in Germany is well underway.”
Germany is kicking off the final quarter on a sour note.
Business activity in the services sector unexpectedly fell a month earlier to 48.0 from 50.3 in September. Analysts claim that a sharp rise in operating costs, linked to wage demands and inflation, as well as a downturn in new business, pushed service providers below the 50 mark.
The manufacturing PMI rose slightly for the fourth consecutive month to 40.7 from 39.6 in September, matching analysts’ expectations. De la Rubia pointed to an improvement in new orders and output, as well as an increase in purchasing stocks.
Looking for some glimmers of hope? Well there are, especially in the manufacturing sector. We take these developments as signs that there is some bottoming out happening in this sector. Manufacturing might return to growth territory in the early part of next year.
