Growth in Germany's manufacturing sector cooled in September to its slowest pace since the start of the year, a survey showed today, giving further evidence a record recovery in Europe's largest economy is slowing.
Companies continued to hire staff, however, at a slightly faster rate than in the previous month. A strong labour market has underpinned German consumer morale, in turn reducing the economy's reliance on exports for its rebound.
Final data showed the Markit Purchasing Managers' Index (PMI) dropped to 55.1 in September from 58.2 in August, falling to its lowest reading since January and just below the preliminary September reading of 55.3.
A reading above 50 indicates expansion in the sector, while a number below that points to contraction.
September's reading, however, was still well above the long-term trend of 52.4, and some exporters, like BMW are enjoying strong demand for their goods.
Loss-making competitor Saab will use BMW engines in a move to help boost its recovery and appeal, the owner of Saab said on Wednesday.
"Germany's manufacturing sector ended the third quarter with a whimper rather than a bang, as highlighted by the drop in output growth," said economist Tim Moore at Markit, which conducts the survey.
"Although production still rose an above-trend pace, there was a considerable loss of momentum since August as domestic demand could not compensate for a further moderation in new export order gains," he added.
Germany's economy -- Europe's largest -- grew by 2.2 per cent in the second quarter, the fastest quarterly growth rate in reunified Germany, boosted by exports.
Economists expect growth to slow in the second half of the year but still see an expansion of at least 3 percent in 2010 as a whole.
Germany relies heavily on exports of manufactured goods to power growth, but the outlook in some of its main trade partners remains gloomy and manufacturing orders fell unexpectedly in July at their steepest rate in more than a year.
Still, the job market remains strong and consumer morale is picking up, fuelling expectations that the rebound, although slowing, remains intact.
Germany's jobless rate fell to its lowest level in more than 18 years in September as companies continued to hire and steelworkers, after a period of muted wage demands, agreed with employers on Thursday to a 3.6 per cent pay rise.
The PMI output sub-index dropped to 54.5, its lowest since October last year, from 60.5 in August and an index tracking new orders fell to 53.1 from 57.6 in the previous month.
Reuters