Germany’s lockdown causes shrink in private sector for fourth consecutive month

Activity in Germany’s services sector shrank for the fourth month in a row in January, as a hard lockdown shuttered most non-essential businesses as well as schools in Europe’s biggest economy, a survey showed on Friday.

IHS Markit’s flash Purchasing Managers’ Index (PMI) of activity in the services sector fell to 46.8 from 47.0 in December’s final reading.

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Activity in the manufacturing sector slowed to four-month low of 57.0 from 58.3 in December, remaining however in expansion territory as exports kept factories humming, the survey showed.

As a result, the flash composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, fell to a seven-month low of 50.8 from 52.0 the previous month.

Germany went into lockdown in November and restrictions were hardened in the middle of December to stem the coronavirus. The measures were this week extended until mid-February.

“All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come,” said Phil Smith, Associate Director at IHS Markit.

“Manufacturing remains a relative bright spot, aided by a sustained upturn in goods exports,” he said.

“Manufacturers are brimming with confidence about the outlook, with output expectations in the sector now at a record high.”

He added: “They are seemingly undeterred by the growing troubles on the supply side, as reports of delays on the delivery of inputs reached an unprecedented level in January.”

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