German Manufacturing Remains in Slump at Start of Second Quarter

(Bloomberg) -- German manufacturing remained in a slump at the start of the second quarter, undermining the resilience of the services sector.

A factory Purchasing Managers’ Index came in at 44.5 in April, little changed from the 44.1 reading in March and weaker than economists had forecast. The euro dropped after the release, and was down 0.2 percent as of 9:33 a.m. Frankfurt time.

A services measure rose to 55.6 from 55.4, keeping the composite gauge above the key 50 level.

“The overall picture for Germany’s private sector has changed very little,” said Phil Smith, an economist at IHS Markit. “Strong growth across the services economy” is continuing to “counteract the export-led weakness in manufacturing.”

The report comes a day after the German government slashed its 2019 growth forecast to a mere 0.5 percent, the weakest in six years. The Bundesbank reported that the underlying pace of expansion remains subdued in the midst of an industrial slump.

The PMI also showed that new business fell for a fourth straight month in April. Demand was particularly weak in the auto industry amid “some hesitancy among U.K.-based clients,” IHS Markit said.

While manufacturers kept staffing unchanged from the previous month, services providers continued to hire. That should support wage growth and consumer demand in the second quarter, according to Smith.

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