Germany's manufacturing sector suffered a second month of contraction in November and activity fell at its steepest rate since mid-2009, data showed today, in the latest sign Europe's bulwark economy is set for a sharp slowdown as global demand falters.
Markit's Purchasing Managers' Index (PMI) fell for a seventh successive month in November to hit 47.9 - matching an initial estimate of 47.9 - and falling further below the key 50 line that divides growth from contraction.
It was the lowest PMI reading since July 2009. The index fell below the 50 mark for the first time in October, snapping a 24-month run of expansion.
"November data highlighted a continued reversal of fortunes in the German manufacturing sector, with weakening export conditions resulting in the fastest drop in output and new orders since mid-2009," said Tim Moore, senior economist at Markit.
"Intermediate and investment goods producers were the hardest hit in November. By contrast, consumer goods output was relatively resilient as stronger domestic demand helped compensate for lower export orders in the sector," he added.
The sub-index for new orders fell to 43.2, showing the outlook is darkening for the German economy, which recovered from the financial crisis faster-than-expected.
The reading for exports fell even further, underscoring weakness in key markets abroad and uncertainty due to the euro zone debt crisis is hurting German trade.
"Lower backlogs of work and rising finished goods inventories were additional symptoms of a waning manufacturing recovery in November," said Moore, noting clients were postponing existing orders due to the uncertain economic outlook.
Berlin has nearly halved its forecast for 2012 growth to 1 percent, and hopes resilient domestic demand will shore up its economy.
Some economists say Germany is teetering on the brink of recession due to the euro zone debt crisis, which is depressing confidence and starting to spill over into the real economy.
A downturn in France's manufacturing sector also accelerated in November, with activity in the sector retreating at the fastest pace since mid 2009 in the face of dwindling demand.
In a sign of more weakness ahead, the flow of new orders fell for the fifth month running as clients tightened their budgets.
The Markit final purchasing managers' index for the manufacturing sector fell to the lowest level since June 2009, falling to 47.3 in November after 48.5 in October.
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