Weak German PMI Trigger Recession Fears

A gauge of German manufacturing output fell to the worst level in seven years in July, underscoring the slowdown in trade that has undercut the exporting powerhouse and may lead the European Central Bank to cut interest rates in two months’ time.

The flash German manufacturing purchasing managers index fell to a reading of 43.1 in July, from 45 in June, IHS Markit said Wednesday. Any reading below 50 indicates contraction.

New orders, employment and inventories all dropped, IHS Markit said. The service side of the economy was faring better, however, as flash German services PMI dipped slightly to a 55.4 reading from 55.8.

The data raises the risk of a “mild” recession, according to Phil Smith, principal economist at IHS.

For the eurozone as a whole, flash manufacturing PMI fell to a reading of 47 from 48.5 in June, which was the worst in more than six years. Flash eurozone services PMI edged lower to 53.3 from 53.6.

The flash reports are based on roughly 85% of responses IHS Markit will collect for the full month. It updates with the result of all the responses in a week.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza