German private sector activity at weakest in more than six years - PMI

BERLIN, Aug 5 (Reuters) - Activity in Germany’s private sector hit its weakest level in more than six years in July, a survey showed on Monday, suggesting Europe’s largest economy started the third quarter on a weak footing.

FILE PHOTO: The skyline with its financial district is photographed early evening in Frankfurt, Germany, October 8, 2018. REUTERS/Kai Pfaffenbach/File Photo

IHS Markit’s final composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors, fell to 50.9 from 52.6 in June -- its lowest since June 2013 and closer to the 50.0 mark that separates growth from contraction.

The final figure was lower than a flash reading of 51.4 and came as an expansion in the services sector only just managed to offset weakness in manufacturing.

“It’s very early stages, but the PMI figures suggest that the economy is heading for another weak GDP (gross domestic product) performance over the third quarter, on the back of what is generally expected to have been a slight contraction in the three months to June,” said IHS Markit economist Phil Smith.

“A further weakening of the data flow in the coming months and Germany’s economy could be staring down the barrel of a mild technical recession,” he added.

Economists talk about a technical recession when there are two consecutive quarters of contraction.

The Bundesbank expects the German economy -- which grew by 0.4% in January-March but is facing headwinds from trade disputes, Brexit-related uncertainty and a cooling global economy -- to shrink slightly in the second quarter.

A PMI covering the service sector declined to 54.5, its weakest level in six months, from 55.8 in June.

Sentiment among service providers about their future output remained positive but it was at its lowest level since December 2014, with firms pointing to concerns about prospects for economic growth and the car industry.

A sister survey published on Thursday had shown a recession in the manufacturing sector deepening in July with factories churning out goods at the slowest pace in seven years and export orders plunging the most in more than a decade.

Reporting by Michelle Martin; Editing by Catherine Evans