The German economy

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

Credit Writedowns,

4 August, 2012

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.