German manufacturing hardly grew in February with activity falling to its lowest in 15 months, a survey showed today.
Markit's Purchasing Managers' Index for manufacturing, which accounts for about a fifth of the economy, plunged to 50.5 in February from 52.3 the previous month.
The headline figure was the weakest since November 2014 and only half a percentage point above the 50 line that separates growth from contraction.
Although it was slightly higher than a flash estimate of 50.2, the PMI was a further sign that factories will contribute little to growth in Europe's largest economy in the first quarter of 2016.
"It looks as if the German manufacturing engine has run out of steam," Markit economist Oliver Kolodseike said, adding that companies were facing both weak domestic and foreign demand.
Total new orders and new export orders both increased at the weakest rates since July 2015. Production growth was especially feeble in the consumer and intermediate goods sectors.
This resulted in manufacturers reducing their staff for the first time in one and half years and backlogs of work rising at the weakest rate in seven months, the survey showed.
"There is certainly a danger that companies will continue to shed staff in coming months," Kolodseike noted.
The survey also showed that deflationary pressures intensified, with lower energy and raw materials prices leading to the steepest drop in input costs since the financial crisis in 2009. In response, some companies also lowered their selling prices.
"Overall, the data are a serious blow to hopes that any meaningful growth in Germany's manufacturing sector would resume at the beginning of the year," Kolodseike concluded.
The German economy is expected to continue its moderate improvement in 2016 due to strong domestic demand which so far has cushioned negative effects of weaker demand from abroad as China and other emerging markets slow.
The economy grew by 0.3% in the fourth quarter of 2015 and by 1.7% in the whole of last year, mainly driven by robust private consumption and higher state spending.
French manufacturing activity stagnates in February
French manufacturing activity stagnated in February as the sector struggles to mount a convincing recovery in the face of weak demand.
Markit said its final Purchasing Managers' Index (PMI) rose to 50.2 in February from 50 in January. That was marginally lower than a preliminary reading of 50.3, but kept the index above the 50-point line dividing expansions in activity from contractions.
Some French business managers surveyed by Markit reported subdued demand and budget restrictions at clients while the flow of new orders continued to ease for the second month in a row.
"Falling new orders were again the source of weakness, leading firms to cut production levels slightly," Markit economist Jack Kennedy said.
"Meanwhile, the survey's price indices point to continued downward pressure on already low inflation," he added.
That will offer little comfort to the European Central Bank as it reviews the euro zone's inflation outlook ahead of a Governing Council meeting next week where it is expected to step up its efforts to revive price growth.
