The Weakening German Economy With No Positive Forecasts

• German Manufacturing PMI arrives at 48.3 in September vs. 48.3 expected.
• Services PMI in Germany contracts further to 45.4 in September vs. 47.2 expected.
• EUR/USD accelerates declines towards 0.9750 on mixed German PMIs.

The German manufacturing and services sectors’ contraction deepened in September as increasing energy costs weighed, the preliminary manufacturing activity report from S&P Global/BME research showed this Friday.

The Manufacturing PMI in Eurozone’s economic powerhouse came in 48.3 at this month vs. 48.3 expected and 49.1 prior. The index tumbled to 27-month lows.

Meanwhile, Services PMI dropped from 47.7 booked previously to 45.4 in September as against the 47.2 estimated. The PMI hit the lowest level in 28 months.

The S&P Global/BME Preliminary Germany Composite Output Index arrived at 45.9 in September vs. 46.0 expected and August’s 46.9. The gauge also reached 28-month troughs.

Key comments from Phil Smith, Economics Associate Director at S&P Global

“The German economy looks set to contract in the third quarter, and with PMI showing the downturn gathering in September and the survey’s forward-looking indicators also deteriorating, the prospects for the fourth quarter are not looking good either.”

“The deepening decline in business activity in September was led by the service sector, which has seen demand weaken rapidly as customers pull back on spending due to tightening budgets and heightened uncertainty about the outlook.”

FX implications

EUR/USD is accelerating the downside following the break of the 0.9800 level mixed German data. The spot was last seen trading at 0.9770, still down 0.60% on the day.