Market Analysis

Germany's manufacturing sector experienced its sharpest contraction in a year during September, driven by significant declines in output, new orders, and employment, according to a survey released on Tuesday.

The HCOB Germany Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, dropped to 40.6 in September from 42.4 in August, indicating a continued slowdown for the fourth consecutive month and marking the lowest reading in 12 months. A reading below 50 signals a contraction in activity.

The final figure was slightly higher than the preliminary reading of 40.3.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that these figures intensify discussions about deindustrialization. "With orders declining at an alarming rate, it's difficult to envision any recovery in the near future," he stated.

New orders experienced their steepest decline since October of the previous year, reflecting market uncertainty, reluctance to invest, and weakness in the automotive sector.

Export sales also saw their sharpest drop in 11 months, with companies citing diminished demand from Asia, Europe, and North America.

De la Rubia added, "The slump in export orders is unprecedented when looking back over the last 30 years. Many firms, particularly in the automotive and mechanical engineering sectors, have yet to find effective responses to the sudden intensification of competition."

Additionally, workforce reductions accelerated in September, resulting in the most significant contraction in factory employment in over four years, the survey revealed.

Business confidence sharply declined, turning negative for the first time in seven months. Over one-third of the surveyed companies anticipated a decrease in output over the next year, attributing their concerns to weaker demand, geopolitical uncertainties, and challenges in the automotive industry.

Paraphrasing text from "Reuters" all rights reserved by the original author.