German business activity contracted for the second consecutive month in August, with the decline exceeding expectations, according to a preliminary survey released on Thursday.
The HCOB German flash composite Purchasing Managers’ Index (PMI), compiled by S&P Global, dropped to 48.5 in August from 49.1 in July, falling short of the 49.2 predicted by a Reuters poll. A reading below 50 signals economic contraction.
This survey indicates that Germany’s economy, which unexpectedly shrank by 0.1% in the second quarter, has not shown improvement as it enters the second half of the year. The composite index combines data from both the services and manufacturing sectors, which together represent over two-thirds of the euro zone’s largest economy.
In August, the services sector index declined to 51.4 from 52.5 in July but remained in expansion territory. Analysts had forecast a smaller drop to 52.3. Conversely, the manufacturing sector continued its downturn, with the index falling to 42.1 from 43.2 in July, contrary to expectations of a rise to 43.5.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented on the data, stating, “The recession in Germany’s manufacturing sector deepened in August, with no recovery in sight.” He noted that the ongoing weakness in manufacturing is beginning to affect the services sector as well. “The likelihood of a second consecutive quarter of negative growth has increased, suggesting that discussions of a recession in Germany may soon be back on the agenda,” he added.
