German Economy Faces Coronavirus Hit as Export Orders Sink

(Bloomberg) —

Germany’s economy is facing renewed pressure from beyond its borders as export orders plunge and manufacturers worry about the impact of the coronavirus outbreak on their supply chains.

The latest purchasing managers index from IHS Markit shows industry still in a contraction, and expectations for output over the next 12 months dropping.

Overall economic momentum was broadly unchanged from January, signaling that domestic demand remains in reasonable shape. Services still slowed though, in part due to weaker tourist numbers.

The report illustrates the uncertain outlook for growth in the 19-nation euro area, potentially extending its protracted slowdown. Manufacturers in both Germany and France reported disruptions due to the coronavirus outbreak in China, where many factories have had to shutter their operations.

A gauge of German manufacturing activity unexpectedly rose, but IHS Markit said that was likely a distortion caused largely by supply chain disruptions.

That number “flatters the sector’s current trajectory,” said IHS Markit economist Phil Smith. “These are still early days in what could potentially be a lengthy saga.”

A report for the euro area is due at 10 a.m. Frankfurt time.

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