German manufacturing weakens, growth cut

Oct. 25, 2012 at 2:30 AM
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MUNICH, Germany, Oct. 25 (UPI) -- Manufacturing in eurozone giant Germany weakened in October, pushing the 17-nation economic and monetary union into further decline, a survey indicated.

The German Purchasing Managers' Index fell to 45.8 in October, its lowest reading since June 2009, down from 46.1 in September, London-based Markit Economics said.

The index drop was due in large part to a sharp fall in the automobile sector and exports to southern Europe, including Spain and Italy, struggling with a sovereign-debt crisis, the survey indicated.

Germany's $3.4 trillion economy is export-driven.

Manufacturing and services activity taken together dropped to 48.1 from 49.2, the survey found.

The index has been below 50 -- the threshold separating growth from contraction -- since February. It is derived from a poll of some 5,000 eurozone businesses.

"The eurozone has slid further into decline at the start of the fourth quarter," Markit Chief Economist Chris Williamson said in a statement, adding: "Even Germany is not immune. It's very disappointing. It's a depressing scenario as things are getting worse."

The October reading is consistent with eurozone output projected to shrink more than 0.5 percent in the fourth quarter compared with the previous one, The Wall Street Journal said.

"The slowdown of the German economy is not only a consequence of the euro crisis, but also of the global economic cooling," ING Group economist Carsten Brzeski said in a research note.

The contraction in Europe's biggest economy was also reflected in a bigger-than-forecast drop in German business sentiment.

The Ifo Institute for Economic Research business climate index, which questions executives at 7,000 companies, fell for the sixth straight month to 100 in October from 101.4 in September.

That is the lowest it's been since February 2010, shortly before the first Greek bailout.

"The clouds over the German economy are darkening," Ifo President Hans-Werner Sinn said.

The Association of German Chambers of Industry and Commerce Wednesday cut its German-economy growth forecast for this year to 1 percent, down from the 1.3 percent it previously expected. The 80-chamber association, which usually goes by the initials DIHK, said it anticipated 0.7 percent growth next year.

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