Factory activity was lower than expected for Europe’s largest economy, dropping to 49.7 points in January from 51.5 in December. A reading below 50 marks a sign of contraction. The bleak figures, revealed today by IHS Markit and the latest in the strong of a sign of a slowdown for Germany, showed the steepest fall in new orders in over 6 years. Phil Smith, Principal Economist at IHS Markit, said: “Germany’s manufacturing sector showed no sign of turning the corner in January, with the downturn in order books extending to a fourth straight month and gathering pace.
“A number of factors continued to undermine demand, affecting predominantly the intermediate and capital goods sectors.
“Thanks to a strong rise in consumer goods output, overall production remained just inside growth territory in January, but there are growing risks to the near-term outlook.
“Stocks of finished goods rose the joint-most on record, backorders continued to be depleted, and firms’ expectations towards future output showed no appreciable improvement from last October’s six-year low.
“The downturn is feeding through to supply chains, with lead-times on purchased items edging closer to stabilisation in January as manufacturers scaled back their demand for inputs.
“Purchase price inflation has also come down a lot in recent months, offering some respite to any struggling manufacturers.”
Germany looks certain to have avoided falling into recession territory after a string of disappointing data pointing towards a slowdown in the economy.
Berlin had left global investors on edge after it was announced the German economy had contracted in the third quarter.
Figures released last year revealed the economy had shrunk by 0.2 percent in the third quarter, marking its first contraction since 2015.
But Europe’s economic powerhouse is almost certain to have avoided sinking into the red after preliminary data showed Germany grew by 1.5 percent in 2018.
It did, however, mark the weakest rate in five years and sources have said the government has cut its economic growth forecast for 2019 to 1.0 percent from 1.8 percent.
An official estimate of fourth quarter growth will be released in February, but the preliminary suggests the economy was likely to have grown in the final months of 2018.
This week also revealed how retail sales plummeted in December, falling 4.3 percent on the month.
Sales also fell by 2.1 percent year-on-year, Germany’s Federal Statistics Office said in a statement.