German manufacturing shrinks in June as demand weakens-PMI

BERLIN (Reuters) - Germany's manufacturing sector contracted at the fastest rate in more than three years in June, with both output and new orders falling, a survey showed on Monday.

The HCOB final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of Germany's economy, fell to 40.6 from 43.2 in May, the fifth consecutive monthly decline.

The manufacturing PMI has been below the 50 level that separates growth from contraction since July 2022.

German manufacturing firms reported deeper cuts to production levels at the end of the second quarter, in response to a sustained weakening of demand, the report said.

"Conditions in the manufacturing sector have undoubtedly worsened, but this is not a crash," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank AG.

The economist noted that new orders began falling from very high levels and manufacturers haven't resorted to job cuts yet.

Nevertheless, expectations towards output prospects in the coming year reached their lowest since last November as surveyed firms cited numerous headwinds to growth.

"Overall, the PMI data for manufacturing show that a recession in this sector, which was still expanding in the first quarter according to GDP statistics, has become much more likely," de la Rubia said.

(Reporting by Maria Martinez; Editing by Toby Chopra)

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