German business activity experienced a contraction in August for the second month in a row, surpassing expectations, according to a preliminary survey released on Thursday.
The HCOB German flash composite Purchasing Managers' Index, assembled by S&P Global, dropped to 48.5 in August from 49.1 in July, falling short of the 49.2 projection in a Reuters poll. This survey indicates that Germany's economy, which unexpectedly shrank by 0.1% in the second quarter, has not accelerated as it entered the second half of the year. Any figure below 50 signifies a contraction. The composite index monitors the services and manufacturing sectors, which together constitute over two-thirds of the euro zone's largest economy.
The services sector index softened in August to 51.4 from 52.5 in July, yet it stayed in expansion mode. Analysts surveyed by Reuters anticipated the index to decline less sharply to 52.3. Manufacturing continued to struggle, with the index plunging to 42.1 from 43.2 in July, surprising analysts who had predicted a rise to 43.5.
"The recession in Germany’s manufacturing sector intensified in August, with no signs of recovery," stated Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, observing that the weakness in manufacturing was beginning to affect the services sector. "The chances of a second consecutive quarter of negative growth have increased, suggesting we may soon be discussing a recession in Germany," he further commented.
