German manufacturing activity grew at its slowest pace in two years in September as new orders fell for a third month in a row, data showed today in the latest sign Europe's largest economy is set for a slowdown.
Markit's Purchasing Managers' Index fell for a fifth consecutive month in September to hit 50.3 - just above an initial estimate of 50.0 but still at its weakest level since September 2009.
That put the index barely above the 50 line that divides growth from contraction, marking a sharp slowdown after it rode above 60 from last December to April this year.
The sub-index for new export orders fell to 45.1, showing the strongest monthly contraction since June 2009 in a fresh sign that weakness in key markets abroad was reaching Germany.
"Anecdotal evidence suggested that weaker economic conditions, an uncertain outlook for global demand and concerns about the euro area debt crisis had all contributed to lower spending by clients in September," Markit said in a statement.
September's PMI survey matched the trend emerging from recent data, suggesting faltering growth abroad and consumers' mounting fears about the scale and repercussions of the euro zone debt crisis are driving the region's main paymaster worryingly close to economic stagnation.
Germany, which notched up growth of 3.6 per cent in 2010, has been one of the best-performing economies in the industrialised world since the end of the financial crisis.
The government still says it expects gross domestic product growth of 3 per cent this year, which would provide vital stimulus to a euro zone that has become increasingly dependent on Germany as its key engine for growth as the region's debt crisis has intensified.
But Germany's quarterly GDP growth slowed more than expected in the second quarter to just 0.1 per cent, and exports fell more than expected in July.
While some leading companies continue to voice optimism about their business outlook - reflected in unemployment rates that continue to fall to new post-reunification lows - a growing number are expressing concern.
The country's closely watched business sentiment index issued by the Munich-based Ifo economic think tank fell for the third month in a row in September, scraping to its lowest reading since mid-2010.
The forward-looking index, based on a monthly survey of some 7,000 companies, now stands at its lowest level since June 2010, the month after Greece became the first euro zone country to receive a bailout.
A final reading of Markit's German composite output index - a snapshot of the economy's health that combines the services and manufacturing sectors - is due on Wednesday.
French manufacturing activity pulled back to the weakest level in over two years in September as new orders slumped in the face of falling global demand, a survey showed today.
With business confidence shaken by Europe's debt crisis, the report indicated that the sector is fast becoming a drag on growth in the euro zone's second-biggest economy.
The Markit final purchasing managers index tumbled to its lowest level since July 2009, falling to 48.2 from 49.1 in August. The result was up from a preliminary reading of 47.3.
Reuters