By LAURA O’CALLAGHAN
GERMANY’S stagnant economy is dragging down the eurozone, economists have warned, as new data showed Europe’s largest economy is on track for another sluggish year.
Figures form IHS Markit showed the country’s purchasing managers’ index (PMI) fell to 43.4 in December from 44.1 the previous month, the first downward movement in three months. The result was worse than the 44.5 reading predicted by economists in a survey by Reuters. And the eurozone also saw a drop in the PMI, an index of prevailing direction of economic trends in manufacturing and services.
A survey showed it fell from 46.9 in November to 45.9 in December, marking 11 months in a row of contraction.
IHS Markit’s principal economist said: “Manufacturing continues to weigh heavily on private sector output, with faster decreases in factory production and employment in December.”
Germany is Europe’s largest economy and by far the biggest manufacturing producers in the currency union
Germany’s stagnant economy is dragging the eurozone down, analysts have warned (Image: GETTY)
The eurozone’s PMI has been contracting for 11 months (Image: GETTY)
The German economy is more or less stagnating, according to the economy ministry. But there are initial signs that an industrial recession could becoming to an end as orders stabilise.
The ministry said in its monthly report released on Monday that indicators at the start of the fourth quarter pointed to subdued private consumption even though disposable incomes continued to rise.
IHS Markit said December figures showed fast decreases in factory production (Image: GETTY)
Consumption has helped keep Germany’s economy ticking over by compensating for weak exports.
Trade tensions this year pushed the German manufacturing sector into a recession.
But the overall economy narrowly escaped sliding into a recession.
Ms Merkel was this week blamed for causing Brexit by BBC radio host Jeremy Vine (Image: GETTY)
Trade tensions this year pushed the German manufacturing sector into a recession (Image: GETTY)
The ministry said: “Industrial production has probably not reached the trough but orders and sales have stabilised at a low level.
“This suggests that industry has gradually stabilised and could pick up slightly in the New Year.”
Analysts fear that the services sector could suffer is the manufacturing sector continues to shrink.
The state of the Germany economy is having a huge impact on the eurozone (Image: EXPRESS)
The report comes as German Chancellor Angela Merkel was this week blamed for bringing about Brexit.
BBC Radio 2 presenter Jeremy Vine said from listening to callers he believed Ms Merkel’s handing of the Greek financial crisis and the more recent migrant influx into Europe had left a “nasty taste” in the mouths of many British voters.
He concluded that the chancellor’s actions had a direct affect on the way many Britons viewed the EU and helped make up their minds to vote Leave.
The German economy is more or less stagnating, according to the economy ministry (Image: GETTY)
The German central bank said last week that Germany would likely experience more sluggishness in 2020 despite a likely rebound in exports as households see their spending power shrink.
The Bundesbank said households’ real disposable income fell due to a slowdown in employment growth.