July 1, 2019 / 8:00 AM / 8 months ago

German manufacturing sector contracts for sixth month in a row in June - PMI

FILE PHOTO: A steel-worker is pictured at a furnace at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony, Germany, March 3, 2016. REUTERS/Fabian Bimmer

BERLIN, July 1 (Reuters) - Activity in Germany’s export-dependent manufacturing sector contracted in June for the sixth time in a row, a survey showed on Monday, as weaker demand weighed on new orders and led to a fall in employment.

Even though IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose to a four-month high of 45.0, it remained below the 50.0 mark separating growth from contraction.

The figure was below a flash reading of 45.4.

New orders have been declining since October and companies in the manufacturing sector have been laying off staff since March as trade disputes and a slowing world economy batter Germany’s exporters.

“Although inching up in June, Germany’s manufacturing PMI remains well inside contraction territory as the sector continues to suffer in the face of global trade tensions, an autos slowdown and lingering uncertainty,” said Phil Smith, Principal Economist at IHS Markit.

“That said, some encouragement can be taken from the fact that the rate of decline in new orders eased for a third month running and future expectations returned – albeit only just – to positive territory,” he added.

In its 10th year of growth, the German economy is expected to grow by a modest 0.5% this year, according to government projections.

The economy has been relying on the domestic market for growth as exports weaken. The consumption-driven cycle has been supported by a solid labour market, low interest rates and generous pay hikes.

“The more domestically orientated consumer goods sector remains the only bright spot, seeing stronger growth in both output and new orders in June,” Smith said.

Writing by Joseph Nasr; Editing by Hugh Lawson

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