German business activity contracts in August, PMI reveals economic slowdown

22 Aug, 2024

German business activity contracts in August, PMI reveals economic slowdown

German business activity declined in August for the second month in a row, according to a preliminary survey by HCOB German flash composite Purchasing Managers' Index (PMI), compiled by S&P Global. The index fell to 48.5 in August, down from 49.1 in July, and missed the forecast of 49.2. This contraction suggests that Germany's economy, which unexpectedly shrank by 0.1% in the second quarter, is struggling to gain momentum in the second half of the year. Any PMI reading below 50 indicates contraction, highlighting ongoing economic challenges.

The survey tracks both the services and manufacturing sectors, which together account for over two-thirds of the euro zone’s largest economy. The services sector index dropped to 51.4 in August from 52.5 in July but remained in growth territory, although it fell more than analysts had anticipated. On the other hand, the manufacturing sector continued to face difficulties, with its index plunging to 42.1 from 43.2 in July, contrary to expectations of a slight improvement.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented that the deepening recession in Germany's manufacturing sector is now affecting the services sector, increasing the likelihood of another quarter of negative growth and raising concerns about a potential recession in Germany.