According to the flash report from IHS Markit, the German economy contracted in September, as the downturn in manufacturing deepened and service sector growth lost momentum. Job creation meanwhile stalled as firms reported weakening demand and pessimism towards the outlook for activity. The fall in output was accompanied by easing price pressures, with average charges for goods and services rising at the slowest rate for over three years.

The Flash Germany Composite Output Index – which is based on approximately 85% of usual monthly replies – registered 49.1 in September, down from 51.7 in August and its first reading below the 50 ‘no change’ threshold since April 2013. The rate of decline signalled was the steepest in almost seven years. 

Growth of business activity in the service sector slowed sharply since August to one of the weakest rates seen over the past three years. Manufacturing fared even worse, however, recording an eighth straight monthly decrease in output and the steepest rate of decline since July 2012.

September’s Flash Germany Manufacturing PMI read 41.4, signalling the sharpest decline in business conditions across the goods producing sector since the depths of the global financial crisis in mid 2009. The survey showed a sustained decline in underlying demand, with total inflows of new business falling for the third month running and at the quickest rate for seven years. 

Firms’ expectations towards the outlook for output over the next 12 months remained in negative territory, albeit ticking up slightly from August’s 81-month low. Manufacturers remained especially downbeat, with sentiment remaining around the weakest recorded since this series began in July 2012.