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The euro zone’s manufacturing contraction is now driven by Germany

By Sober Look

As the Eurozone recession (which started months ago) worsens, the area’s manufacturing activity, as measured by the PMI index, is contracting at a pace not seen since 2009.

A great deal of this decline however is now driven by Germany (rather than the periphery), whose manufacturing PMI is showing a rapid deterioration. It is somewhat surprising, given that we had signs of economic improvements in Germany as recently as May. But the German "decoupling" hopes did not materialize, as the economy is pulled down by the rest of the Eurozone combined with the slowdown in China, one of the nation’s largest export markets.

WSJ: – Business activity in the euro zone continued to shrink in July, new orders plunged and German private-sector activity fell at its steepest rate in more than three years, a sign that the euro zone’s debt crisis is taking its toll on the region’s biggest economy and main source of financial support.

The figures suggest the 17-nation euro-zone economy is heading for a period of contraction and recovery is a distant prospect.

There is however one Eurozone country that is bucking the trend in spite of tremendous obstacles. But let’s leave that for the next discussion.

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Sober Look is a no-hype financial markets/macro blog that typically relies on data analysis, primary sources, and original materials. We keep it concise, to the point, with no self-promoting nonsense, and no long-winded opinions. If you are looking for Armageddon predictions or conspiracy theories, you will be thoroughly disappointed. Topics include financial markets, banking, asset management, risk management, derivatives, global economy, policy, and regulation, with the emphasis on finance education. Follow him on his blog or twitter.

1 Comment

  1. David_Lazarus says:

    I think that the root cause of this fall in German manufacturing has been the discussion of euro exits. If such exits become reality then any sales to these nations will result in big losses. So why trade with these nations? This is destroying the export markets that have benefited Germany in recent years. Merkel is responsible for this recession. Self inflicted.