© Reuters. FILE PHOTO: Cranes of a construction site are seen near a residential building, ahead of the summit for affordable housing and construction at the Chancellery in Berlin, Germany September 25, 2023. REUTERS/Lisi Niesner/File Photo
BERLIN (Reuters) – The downturn in Germany’s manufacturing sector deepened in February as output and new orders declined at a faster rate, a survey showed on Friday.
The HCOB final Purchasing Managers’ Index (PMI) for German manufacturing fell to 42.5 in February from 45.5 in January, ending a six-month run of steady increases that nonetheless never surpassed the 50 level separating growth from contraction.
The reading was slightly above the flash estimate of 42.3.
“The widespread nature of the downturn offers little hope for a turnaround in the near future,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB), pointing to the accelerated downturn in new orders, output and employment.
Manufacturing accounts for about a fifth of GDP in Germany, Europe’s biggest economy.
De la Rubia said that Germany’s worsening situation was unique in the euro zone when compared with France or Italy, which are much less depressed, or in Spain’s case even growing.
“However, better to have trading partners whose industry is showing some robustness instead of being dragged down by them further into the abyss,” de la Rubia said.
Delivery times improved in February, with disruptions in the Red Sea due to geopolitical tensions having little overall effect on German companies, de la Rubia said, but that was more to do with lower demand.
“It’s like Germany’s manufacturers are operating in a bubble,” he said.
New orders, which have been contracting for 23 consecutive months, were the main drag on the sector’s overall performance, with surveyed firms citing customer hesitancy, destocking tendencies and tight financial conditions for the situation.