German economy continues to struggle with manufacturing troubles spreading to services

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The German economy is continuing to struggle, new data released Thursday shows, with the difficulties of its export-oriented base extending to the service sector as global trade dries up.

The IHS Markit flash German manufacturing PMI inched up to 41.9 in October from September’s decade-worst 41.7, which is still a reading that shows the factory segment of the country’s economy in dire straits. Readings below 50 indicate contraction.

The flash German services PMI meanwhile fell to a 37-month low of 51.2 in October from 51.4.

The manufacturing data was in line with forecasts, while the services figures lagged expectations of a 51.7 reading, according to FactSet.

IHS said the employment component of the composite index with both manufacturing and services fell for the first time in six years.

As global trade wilts in the face of conflicts across the globe, the German government has debated, but not instituted, fiscal stimulus. The International Monetary Fund says Germany’s fiscal space is “substantial” after years of running surpluses.

For the eurozone as a whole, the manufacturing PMI rose to a 2-month high of 46.2, while the flash services PMI rose to 51.8 from 51.6. Economists had expected a 46 reading on manufacturing and a 51.9 reading on services, according to a FactSet poll.

An improved performance out of France kept the eurozone composite index above the 50 mark, at 50.2 in October.

The flash data is based on 85% to 90% of survey responses in a month.

European stocks SXXP, +0.50%  were stronger on Thursday, while the yield on the 10-year German bund TMBMKDE-10Y, +3.68%   was steady at -0.39%.

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