March 1, 2012 / 8:57 AM / 6 years ago

German manufacturing sector growth slows in February - PMI

BERLIN (Reuters) - Growth in Germany’s manufacturing sector slowed to a near stand-still in February, a key survey showed on Thursday, tempering hopes of a strong pickup in Europe’s largest economy.

Markit’s manufacturing Purchasing Managers Index (PMI) fell to 50.2 from January’s 51.0, barely above the 50 mark which separates contraction from expansion. This was slightly above an original estimate for 50.1.

“Lower new orders and job creation took the shine off the upturn in production levels, meaning that the latest PMI number really suggests a broad stabilisation in manufacturing business conditions rather than outright improvement,” said Tim Moore, a senior economist at Markit.

The PMI survey showed new business levels dropped for the eighth consecutive month, as demand slowed from Europe, which is mired in a sovereign debt crisis.

Weaker demand in turn made firms more cautious about hiring.

The rate of job growth was only marginal and the weakest in the current 23-month period of expansion.

Data on Wednesday showed unemployment held steady at 6.8 percent in February and analysts said steep drops in joblessness

experienced over the past year are likely over for now.

Germany’s export-driven economy contracted in the last quarter of 2011 as the debt crisis spread from Greece to key euro zone trading partner.

Data shows exports fell at their fastest rate in nearly three years in December and imports unexpectedly dropped.

But closely-watched sentiment surveys such as the Ifo business climate index, which rose for the fourth month in February, suggest a pickup in the economy this year.

Many economists expect it will stagnate in the first quarter, dodging the two quarters of contraction which define a recession, before recovering from the second quarter onwards.

“Looking ahead, weakening euro area export demand and rising oil prices remain the key risks to growth,” said Markit’s Moore.

“On the positive side, Germany’s economy seems increasingly likely to avoid a double-dip recession, and this could help spur a turnaround in clients’ willingness to commit to new orders.” - Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

Reporting By Sarah Marsh; Editing by Toby Chopra

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