BERLIN – The German manufacturing sector continued to contract in May as factories faced weak demand due to a pandemic of laid off employees, according to a survey published on Monday that showed business was pessimistic about the future.
IHS Markit’s final Managers Purchasing Index (PMI) for manufacturing, which accounts for around one fifth of Europe’s largest economy, rose to 36.6 from 34.5 in April. The flash reading is 36.8.
“Even though more factories have begun operations after loosening of restrictions, weak fundamental demand is still a limiting factor, as evidenced by the survey size of new orders that rebounded far less than production in May,” said Phil Smith, principal economist at IHS Markit.
“Manufacturing production has dropped 7-8% from its peak at the end of 2017 even before the onset of the pandemic, and now that number is seen in the region of 25-30%.”
Output declined more slowly than in April, but with companies operating far below full capacity and pessimistic about future output, factory staff reductions accelerated to their fastest pace in 11 years, with the investment goods sector being hit hard.
(Reporting by Joseph Nasr; Editing by Catherine Evans)
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