Germany’s Economic Contraction Deepens in February

Germany witnessed a deepening economic contraction in February, as a modest uptick in services activity failed to offset a significant downturn in the manufacturing sector, according to a preliminary survey published on Thursday.

The Standard & Poor’s Global Hamburg Commercial Bank Composite Purchasing Managers’ Index (PMI) plummeted to 46.1 points in February, down from 47.0 points the previous month. This figure fell short of expectations in a Reuters poll, which had projected a rise to 47.5 points.

This marks the eighth consecutive month that the index has remained below the 50-point threshold, indicative of contraction, and records the swiftest pace of decline since October.

The composite PMI tracks both the services and manufacturing sectors, which jointly constitute more than two-thirds of the German economy.

Tariq Kamal Choudhury, an economist at the Hamburg Commercial Bank, remarked, “After a glimmer of hope in the past months, gloom is now hanging over the German industrial sector.”

Business activity in the manufacturing sector plummeted to 42.3 in February, a stark drop from 45.5 the previous month, falling well below analysts’ expectations of a rise to 46.1 points.

Choudhury noted that lower prices for production inputs and shorter delivery times, initially perceived as positive signs amidst price pressures and the Red Sea crisis, actually underscore the persistent weakness in demand.

On a slightly brighter note, the services sector PMI edged up to 48.2 points in February from 47.7 in the previous month, surpassing analysts’ expectations of 48.0 points. However, it still remains in contraction territory.

Key Points:

• Germany’s economic contraction deepens in February, as per the preliminary survey.
• Composite PMI falls to 46.1 points, missing expectations and marking the sharpest decline since October.
• Manufacturing sector experiences a significant downturn, with PMI dropping to 42.3 points.
• Services sector sees a modest improvement but remains in contraction territory, with PMI rising to 48.2 points.
• Persistent weakness in demand highlighted by lower input prices and shorter delivery times.
• Economic outlook remains uncertain amidst ongoing challenges.