Factory activity has dropped further than expected by economists, signaling a sharp downturn in the economy, data shows

German manufacturing activity dropped well below expectations in February, indicating an accelerated rate of economic downturn, the latest data compiled by S&P Global has revealed.   

The manufacturing purchasing managers’ index (PMI) in the Eurozone’s economic powerhouse dropped sharply below economists’ expectations, from 45.5 in January to 42.3 this month, hitting its lowest level in four months. Overall business activity in Germany slipped to 46.1 from 47. A reading below 50 indicates a contraction.   

German factories continue to struggle amid a downturn in global demand, particularly from China, high interest rates, and expensive energy, the figures showed.   

The decline was characterized by a sharp decrease in manufacturing output and a steeper contraction rate, highlighting the sector’s increasing difficulties, S&P Global said. 

“After a glimmer of hope in recent months, German industry is feeling pretty bleak now,” said Tariq Kamal Chaudhry, an economist at Hamburg Commercial Bank. The data reveal “a decline in output, alongside plummeting new orders both domestically and internationally.” As fears of a deepening downturn in the EU’s top economy are mounting, manufacturers are pessimistic about the outlook for 2024, economists say. 

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According to S&P Global, manufacturing and exports in Germany saw a rapid decline in new business, adding to the country’s economic challenges.

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