By Scott Kanowsky
Investing.com — German manufacturers saw business activity slump to its lowest level in 23 months in June, as exports fell and domestic demand came under pressure from the global economic uncertainty caused by rising inflation, according to a preliminary survey on Thursday.
Data firm S&P Global said its flash June purchasing managers index for Germany’s manufacturing sector – which makes up about a fifth of the country’s economy – dropped to 52.0 from 54.8 in May, missing estimates.
S&P Global noted that manufacturing firms were hit by their sharpest decline in new orders in two years, while demand for exported goods also fell due to client concerns over soaring prices, the war in Ukraine, and COVID disruptions in China.
However, a reading above 50 still indicates expansion.
Germany’s services sector PMI also fell to a five-month low of 52.4 points in June, below expectations. S&P Global said a downturn in business inflows also impacted these businesses, with new work falling for the first time in six months.
Meanwhile, the composite figure – which brings together both manufacturing and services – dropped to 51.3, its lowest level in half a year.
German firms reported their lowest confidence towards future business activity in two years, with sentiment in the manufacturing sector turning particularly negative due to fears over inflation, supply disruptions, and sliding sales.
“Thanks to a particularly grim outlook for the manufacturing sector, business confidence towards future activity is now at its lowest since the first wave of the pandemic two years ago, and we’re seeing this translate into a broad-based slowdown in job creation as companies start to reassess their staffing needs going forward,” said Phil Smith, Economics Associate Director at S&P Global Market Intelligence.