The German economy remained in contraction at the start of the fourth quarter, according to the October flash PMI data from IHS Markit. The Flash Germany Composite Output Index – which is based on approximately 85% of usual monthly replies – registered 48.6 in October, little-changed from September’s near seven-year low of 48.5 and below the 50 no-change level for the second month in a row. Moreover, the survey showed employment falling for the first time in six years.

The Flash Germany Manufacturing PMI meanwhile also remained firmly in contraction territory at 41.9 in October. This represented a marginal improvement from September’s ten-year low of 41.7, as rates of decline in factory output and new orders eased slightly. However, weighing on the index were faster decreases in employment and stocks of purchases, alongside a more marked improvement in supplier delivery times. Latest data showed the rate of growth of service sector business activity easing to only a modest pace that was the weakest for over three years. Behind this was a sustained decline of demand in the sector, with inflows of services new business falling for the second month in a row and at the quickest rate since June 2013. 

Business sentiment meanwhile turned increasingly negative, with expectations falling to the lowest since November 2012. Driving this was a marked deterioration in confidence across the service sector, where for the first time in almost seven years the number of firms expecting activity to fall over the coming year exceeded those anticipating an increase. Manufacturers remained strongly pessimistic about the outlook, though expectations rebounded further from August’s record low to the highest since June.