German manufacturing contracts for third month in a row - PMI
BERLIN, March 22 (Reuters) - German manufacturing contracted
further in March, a survey showed on Friday, compounding fears
that unresolved trade disputes are exacerbating a slowdown in
Europe's biggest economy.
After nine successive years of growth, the German economy is
facing trade conflicts between the United States and both China
and the European Union as well as weakening economic activity in
the euro zone.
IHS Markit's flash composite Purchasing Managers' Index
(PMI) measuring activity in services and manufacturing, which
together account for more than two-thirds of the economy, fell
to 51.5, it lowest reading since June 2013.
The fall was mainly driven by the weakest activity in
manufacturing since August 2012. That sub-index fell to 44.7,
remaining below the 50.0 mark separating growth from contraction
for a third straight month.
Growth in services slowed to 54.9, after rebounding to 55.3
Markit economist Chris Williamson said the diverging trends
raised the question of how long services can continue to provide
impetus for the economy and help it avoid a recession.
"As long as you get growth in the services sector you can
avoid a wider recession," he said.
"When you look at the employment trend and new orders, they
pose a downside to the outlook. They look like they will subdue
business confidence further and lead to a further retrenchment
of spending by businesses and consumers, raising the risk of a
The survey showed that manufacturers had laid off people in
March, the first such development in three years. New orders
contracted for the sixth time in a row.
Williamson said manufacturing contracted 1 percent in the
first quarter, compared with a 1.7 percent expansion in
services. That suggested the economy grew by 0.2 percent in the
first quarter, he said.
In addition to trade hostilities, manufacturing is also
facing the risk of Britain leaving the European Union without an
agreement on the terms of its departure.
Germany narrowly avoided a recession in the fourth quarter,
when growth stagnated after contracting in the third quarter.
The economy has been relying on consumption for growth. A
robust labour market, rising wages and low interest rates have
been supporting the consumption-driven cycle.
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(Reporting by Joseph Nasr, editing by Larry King)
((Joseph.Nasr@thomsonreuters.com; +49 172 678 5836; Reuters
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