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Wednesday, March 4, 2009

The German Economy Contracts At An Ever Faster Rate

The Germany private sector shrank in February at its sharpest rate in more than a decade in February according to the latest Composite Purchasing Managers reading.
Final data from Markit economics showed the composite PMI fell to 36.3 from 38.0 in January, the lowest level registered since the series began in January 1998.

"The German economy remained on a sharp downward trajectory in February as a result of rapidly falling manufacturing output and a marked downshift in the performance of the service sector," said Tim Moore, economist at Markit Economics.
The data were consistent with the German econom contracting by some 3 percent this year, Tim Moore added.The German government expects the economy to contract by around 2.25 percent this year, though some economists have gone as suggesting we may see a 5% contraction, and this is more or less the view I hold from what we have seen to date. Since World War Two, the German economy has never contracted by more than one percent in any one year.

Anecdotal evidence from the PMI survey suggested the decline in private sector activity reflected a reluctance among clients to commit to new work. A sub-index on new business fell to 31.7 from 35.2 in January, hitting a series low. The composite PMI reflects the results of services and manufacturing sector surveys. The final services sector PMI fell to 41.3 from 45.2 in January, hitting a series low.

A services sub-index on new business dropped sharply to 36.6 from 42.5 in January.The February manufacturing PMI survey, released on Monday, showed the sector contracted for a seventh month running in February, as employers cut staff in response to sagging global demand.

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