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German manufacturing, services sectors shrink in July -flash PMI

·1-min read
FILE PHOTO: The Volkswagen assembly line in Wolfsburg, Germany

BERLIN (Reuters) - German business activity unexpectedly shrank in July, a preliminary reading of a purchasing managers survey showed on Friday, as companies were hit by inflation pressures and supply chain disruptions.

S&P Global's flash Purchasing Managers' Index (PMI) for services fell to 49.2 in July, from June's final reading of 52.4, while its manufacturing index dropped to 49.2, from 52.0 the previous month.

Analysts had forecast both services and manufacturing this month would be above the 50 mark, which signals growth in activity, at 51.2 and 50.6, respectively.

The flash composite PMI, which tracks both the manufacturing and services sectors which together account for more than two-thirds of the German economy, fell to 48.0, its lowest level in more than two years, from 51.3 last month.

If confirmed in a final reading of the PMI at the end of the month, it would be the first decline in business activity since last December.

"Having enjoyed a growth boost from the previous easing of virus-related restrictions, a collision of various headwinds in July served to push the German economy into contraction territory for the first time in 2022 so far," said Paul Smith, economics director at S&P Global Market Intelligence.

Uncertainty caused by the war in Ukraine, ongoing supply delays and inflation and its pressures were behind "the worst performance of private sector activity since the height of the first pandemic wave in the spring of 2020," added Smith.

"No wonder then company expectations have subsequently dropped into negative territory for the first time in over two years," he added.

(Reporting by Miranda Murray; Editing by Susan Fenton)

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