German economic activity deteriorates in Dec-PMI

BERLIN (Reuters) – Germany’s economic downturn worsened this month with both manufacturing and services activity contracting, a preliminary survey showed on Friday, pointing to a recession in Europe’s biggest economy at the end of the year.

The HCOB German Flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, fell for the sixth consecutive month, declining to 46.7 in December from November’s 47.8, below the 48.2 forecast by economists.

A reading below the 50 level points to a contraction in business activity.

The composite PMI index tracks the services and manufacturing sectors that together account for more than two-thirds of the German economy.

“If you are on the hunt for gifts right now, you will not strike gold in the latest PMI survey for Germany,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “This confirms our view of a second consecutive quarter of negative growth by the year’s close.”

The German economy contracted in the third quarter of the year. Two consecutive quarters of decline are defined as a technical recession.

Business activity in the services sector fell for the third consecutive month, to a reading of 48.4 in December from 49.6 in the previous month, below analysts’ forecast of 49.8.

“In the realm of services, the economic landscape is still dominated by the gloomy hues of stagflation,” de la Rubia said. Output contracted, while input prices rose.

The manufacturing PMI rose to 43.1 from 42.6 in November, slightly below analysts’ expectations of 43.2 and still in contraction territory. New orders continue to contract rapidly, the survey showed.

Inflationary pressures meanwhile increased at the end of the fourth quarter, with firms reporting the steepest rise in output prices for seven months amid a more marked uptick in average costs.

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