Shrinking order books and expectations for a decline in output signal companies in Europe’s largest economy are bracing for a possible recession.
German manufacturing shrank for an eighth month in August, barely offset by still-solid services, according to IHS Markit. Overall business confidence declined and orders fell for the third time in four months. A Purchasing Managers’ Index stood at 51.4, close to its lowest level in six years.
GDP declined in the April-June period, and persistent signs of weakness in Europe’s powerhouse -- driven in particular by mounting global trade tensions and slowing demand in China -- don’t bode well for hopes that the euro area will get a rebound later this year.
European Central Bank policy makers have already started laying the groundwork to add monetary stimulus, and are expected to cut interest rates at their next meeting in three weeks.
According to the report, the number of firms expecting production to fall over the next 12 months exceeded those predicting an increase for the first time in nearly five years. Backlogs of work fell for a 10th consecutive month.
Companies also slowed hiring. While jobs growth in services was still solid, employment in manufacturing declined at the fastest pace in seven years.
Source : Bloomberg