July 1, 2020 / 8:17 AM / 5 days ago

German manufacturing contraction eases in June: PMI

FILE PHOTO: An employee works at the A3 and A4 production line of the German car manufacturer Audi, amid the spread of the coronavirus disease (COVID-19) in Ingolstadt, Germany, June 3, 2020. REUTERS/Andreas Gebert

BERLIN (Reuters) - Germany’s manufacturing sector contracted at a slower pace in June, a survey showed on Wednesday, as factories ramped up production after restrictions to constrain the spread of the coronavirus were lifted.

IHS Markit’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, rose to a three-month high of 45.2 from 36.6 in May. That was still below the 50 mark that separates growth from contraction but above a flash reading of 44.6.

Phil Smith, principal economist at IHS Markit, linked the rise to a pick up in production activity and a more positive outlook as manufacturers hoped that the lifting of restrictions would spur demand.

“On the one hand, the data show more German manufacturers starting to ramp up production, and a regaining of confidence which has been severely lacking in recent months,” said Smith. “But on the other, demand remains very much subdued and is holding back any recovery.”

The survey also showed that with demand remaining weak, factories were relying on a dwindling backlog of orders that threatens manufacturing jobs.

“The export market remains difficult, and probably will for some time,” said Smith. “But it’s not all bad on this front either, with German manufacturers already seeing sales returning in Asia, and to China in particular.”

Reporting by Joseph Nasr; Editing by Catherine Evans

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