Germany economy crisis: Merkel economy fresh blow as manufacturing still in the red | City & Business | Finance

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The manufacturing PMI for Germany was higher than in May, but still below the line of growth as the sector contracted for the fifth month in a row. The PMI hit 45.4 in June from 44.3 in May as manufacturing continued to suffer from the United States-China trade war and political uncertainty through Brexit. Anything below 50 means the sector is in recession territory, where it has remained since January. Activity in the services sector edge higher, rising slightly to 55.6, a two-month high, from 55.4 in May.

That left the composite PMI index measuring activity in the services and manufacturing sectors that together account for over two-thirds of the German economy unchanged at 52.6.

The latest numbers suggest an easing in the decline rather than a complete return to growth.

Trevor Balchin, Economics Director at IHS Markit, said: “Service sector growth remains above-trend and although the manufacturing downturn continued into June, there are tentative signs that the worst has passed.”

After a modest expansion of 0.4 percent in the first quarter of 2019, the German government has slashed its growth forecast for the full year to 0.5 percent.

The Bundesbank said on Monday it expected economic output to fall slightly in the second quarter.

Markit economist Chris Williamson said he expected a growth rate of between 0.2 percent and 0.3 percent in the second quarter, adding that the manufacturing sector had not necessarily bottomed out yet.

Mr Williamson said: “But the service sector is still a key driver of German growth and I think that will continue to be so.”

This week saw a German economist warn that Brexit will push Germany into “severe recession”.

Writing in German website Das Investment, Klaus Bauknecht, an economist at IKB Deutsche Industriebank, said a no deal scenario will spark widespread disruption across Europe.

He said: “If the Bank of England assumes a worst-case Brexit drop of up to 10 percent in the UK, that means there will be fundamental disruptive factors across Europe, including growth loss in Germany.

“Such a UK decline would undoubtedly push the German economy into a severe recession.

“For Germany there would be gross domestic product growth losses of 2.0 percent in the first and second year.”



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