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German PMI Shows Third Consecutive Month of Contraction in September

Germany’s preliminary results for September, released on September 22, indicate that business activity in the country has contracted for a third consecutive month. This ongoing decline has been attributed to sustained drops in consumer demand for both goods and services, signaling a significant economic contraction for Germany in the third quarter of 2023.

The Purchasing Managers’ Index (PMI) for September, which includes data from both German manufacturing and primary services, as measured by Hamburg Commercial Bank (HCOB), rose to 46.2. Although this represents an improvement from August’s figure of 44.6, it fell short of economists’ expectations, who had anticipated a reading of 47.2. It is essential to note that PMI figures below 50 signify a contraction in business activity.

The PMI index is a comprehensive gauge of economic health, encompassing both the manufacturing and service sectors, which collectively make up two-thirds of Germany’s economy. As the largest economy in Europe, Germany’s economic performance holds significant weight in the broader European context.

In September, business activity within the service sector contracted for the second consecutive month, although the rate of contraction showed signs of easing. The PMI for the primary services sector increased to 49.8, up from August’s 47.3. However, it still remains below the crucial 50-point threshold, indicating a continued contraction in business activity.

Meanwhile, the manufacturing sector PMI recorded a slight uptick, rising to 39.8 in September from the previous month’s 39.1. Despite this modest improvement, the manufacturing sector continues to experience a sharp contraction.

The persistent contraction in both the service and manufacturing sectors underscores the challenging economic conditions faced by Germany. This trend raises concerns about the country’s overall economic performance and its potential implications for the broader European and global economies. As Germany navigates these headwinds, policymakers and economists will closely monitor developments and assess strategies to revive economic growth.

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