German factory activity sluggish start in 2016

Feb 02, 2016

Growth in German manufacturing eased to a three-month low in January as weaker demand from abroad weighed on new orders, a survey showed on Monday, suggesting Europe's largest economy got off to a sluggish start to the new year.

Markit's purchasing managers' index for manufacturing, which accounts for about a fifth of the economy, fell to 52.3 in January from 53.2 the previous month.

That was slightly above the prior estimate of 52.1 and comfortably above the 50 line that separates growth from contraction, but it was still the weakest reading since October.

"It's an unspectacular start to the year for German manufacturers," said Markit Economist Oliver Kolodseike. "The forward-looking indicators, meanwhile, suggest that while output growth should be maintained in coming months, the pace of

expansion is unlikely to gather significant momentum."

Lower prices for oil and raw materials drove down input costs at one of the steepest rates since the financial crisis, prompting some companies to reduce their average selling prices.

Despite this fall in prices, factory output and new orders both increased at slower rates, with the latter held back by weak demand from export markets.

A slump on China's financial markets and economic data showing slowing growth and deteriorating business conditions may hold back German companies by reducing their sales prospects, the German Finance Ministry said on Friday.

Backlogs of work also accumulated at the weakest pace in three months, but Kolodseike said higher employment may account for some of the slowdown.

Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

Source: REUTERS UK