May 21, 2020 / 7:33 AM / 6 days ago

Looser lockdown helps Germany's private sector gain some ground: PMI

BERLIN (Reuters) - Germany’s private sector recession eased in May as a loosening of lockdown measures in the coronavirus crisis helped services and manufacturers in Europe’s largest economy gain some ground, a survey showed on Thursday.

Containers are loaded on freight trains at the railroad shunting yard in Maschen near Hamburg, Germany November 14, 2019. REUTERS/Fabian Bimmer

IHS Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, rose to 31.4 after hitting a record low of 17.4 the previous month.

This undershot a Reuters poll of analysts who had predicted a bigger increase to 34.1. It marked the third month in a row that the index was below the 50 threshold which separates growth from contraction.

“The rate of decline in activity has eased considerably since the peak of virus containment measures in April, but we are still a long way off business as usual and the path to recovery remains unclear,” IHS Markit economist Phil Smith said.

The services sector, which was hit hardest by the gradually imposed lockdown measures since mid-March, recovered a bit. The flash PMI for business activity in services jumped to 31.4 in May after hitting a record low of 15.9 the previous month.

The flash PMI for manufacturing rose to 36.8 from 34.5 in April.

Smith said companies expected demand to remain weak for quite a while so they continued to cut jobs “at a worrying rate” in order to better align capacity with current conditions.

“The scale of job losses is a key risk to the longer-term outlook,” he added.

The government expects the coronavirus pandemic to plunge the economy into its deepest recession since World War Two, predicting an unprecedented contraction of 6.3% this year.

Chancellor Angela Merkel and Finance Minister Olaf Scholz are working on a fiscal stimulus package including “timely, targeted, temporary and transformative” measures to help companies recover from the crisis.

Reporting by Michael Nienaber; Editing by Catherine Evans

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