German flash manufacturing PMI hits 6-year lows of 44.7 in March, EUR drops sharply

German manufacturing activity grew at the weakest pace in six years in the month of March, the latest manufacturing activity report from IHS/Markit research showed this Friday.

The German manufacturing purchasing managers index (PMI) slipped deeper into contraction territory and arrived at 44.7 versus 48.0 expected and 47.6 previous. Meanwhile, services PMI dropped to a two-month low level of 54.9 as against previous months reading of 55.3 and 54.8 anticipated.

The IHS Markit Flash Germany Composite Output Index hit 69-month lows of 51.5 in March, down from 52.8 booked in February. 

Key comments from Phil Smith, Principal Economist at IHS Markit:

“The downturn in Germany’s manufacturing sector has become more entrenched, with March’s flash data showing accelerated declines in output, new orders and exports. Uncertainty towards Brexit and US-China trade relations, a slowdown in the car industry and generally softer global demand all continue to weigh heavily on the performance of the manufacturing sector, which is now registering the steepest rate of contraction since 2012.”

“The domestic market remains strong, which continues to be reflected in wage pressures and robust growth across the services sector of the economy, but the question is whether it can withstand a protracted downturn in manufacturing. The first decrease in factory employment for three years is perhaps a warning sign for the health of domestic demand, with overall job creation now running at its lowest since May 2016.”