By Maria Martinez
BERLIN (Reuters) – German business activity contracted in September at its sharpest pace in seven months, according to a survey on Monday that suggested Europe’s largest economy had tipped into recession.
The HCOB German flash composite Purchasing Managers’ Index, compiled by S&P Global, fell to 47.2 from 48.4 in August, below the 48.2 forecast in a Reuters poll. Any reading below 50 indicates contraction.
The survey suggests Germany’s economy, which contracted by 0.1% in the second quarter, extended its downturn in the third quarter. A recession is normally defined as two consecutive quarters of contraction.
“A technical recession seems to be baked in,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, forecasting a 0.2% contraction in the third quarter.
The composite index tracks the services and manufacturing sectors that together account for more than two-thirds of the euro zone’s largest economy.
The services sector index eased in September to 50.6 from 51.2 in August. Analysts polled by Reuters expected the index to fall less steeply to 51.0.
Manufacturing remained mired in a downturn, with the index tumbling to 40.3 from 42.4 in August, wrongfooting analysts who had expected it to fall only slightly to 42.3.
“The downturn in the manufacturing sector has deepened again, evaporating any hope for an early recovery,” de la Rubia said.
He added that the slump in manufacturing was beginning to spill over into Germany’s services sector, with growth among service providers having slowed for four consecutive months.
(Reporting by Maria Martinez; Editing by Christina Fincher)
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