German economic contraction increases unexpectedly in February

A preliminary survey published on Thursday showed that the contraction of the German economy increased in February, as a slight improvement in services activity was unable to offset a sudden sharp deterioration in the manufacturing sector.

According to Reuters, the Hamburg Commercial Bank Composite Purchasing Managers’ Index issued by Standard & Poor’s Global fell to 46.1 points in February, compared to 47.0 points in the previous month, which is inconsistent with expectations in a Reuters poll for a rise to 47.5 points.

Thus, the index continues to fall below the 50-point level that separates growth from contraction for the eighth month in a row in February and records the fastest pace of decline since October.

The composite PMI tracks the services and manufacturing sectors, which together make up more than two-thirds of the German economy.

“After a glimmer of hope in the past months, gloom is now hanging over the German industrial sector,” said Tariq Kamal Choudhury, an economist at the Hamburg Commercial Bank.

Business activity in the manufacturing sector fell to 42.3 in February from 45.5 in the previous month, well below analysts’ expectations for a rise to 46.1 points.

Chaudhry said that lower prices for production inputs and shorter delivery times, which are signs that appear positive at first glance in light of price pressures and the Red Sea crisis, confirm the chronic weakness in demand.

The services sector PMI rose to 48.2 points in February from 47.7 the previous month, beating analysts’ expectations of 48.0 points, but still in contraction territory.

The economist at Hamburg Commercial Bank was more optimistic about services, saying, “We can see a light at the end of the tunnel, but it may take until the second quarter to reach it.”