Germany's powerful manufacturing economy slowed to levels last seen during the global financial crisis this month, according to private data published Monday, cementing the case for recession in Europe's biggest economy.
The IHS Markit PMI reading for Germany's manufacturing sector slumped to 41.4 points in September, the lowest in more than a decade and 2.1 points south of last month's already-gloomy assessment, as job creation stalled and the impact of U.S.-China trade tensions and the impending exit of Britain from the European Union hammered order books.
The overall IHS Markit Composite reading for Germany fell to 49.1 points, the lowest in seven years and well below the 50 point mark that generally signals economic growth. The IHS reading for the broader Eurozone was also softer-than-expected, with a composite tally of 50.4 points and a manufacturing assessment of just 46 points, the lowest since 2012.
"The economy is limping towards the final quarter of the year and, on its current trajectory, might not see any growth before the end of 2019," IHS economist Phil Smith said. "The manufacturing numbers are simply awful. All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009."
European stocks fell to a session low following the German data release of 390.61 points, while the single currency slumped to 1.0972 against the U.S. dollar as investors bet that the recession signals could elicit a deeper monetary support from the European Central Bank, which said earlier this month it would re-start its controversial bond buying program in order to kick-start growth.
Benchmark 10-year German bund yields, a proxy for risk-free borrowing rates in the region, fell 3 basis point to -0.55%.
Germany's economy shrank 0.1% over the three months ending in June, the Federal Statistics Office said last month, and industrial orders and manufacturing output rates have been falling for much of the summer as the U.S.-China trade spat accelerated and Brussels continued to negotiate a nascent trade deal with Washington.
"With job creation across Germany stalling, the domestic-oriented service sector has lost one of its main pillars of growth," said Smith. "A first fall in services new business for over four-and-a-half years provides evidence that demand across Germany is already starting to deteriorate."