China’s coronavirus bound to hurt Germany’s struggling manufacturers: IHS Markit

BERLIN (Reuters) – German manufacturers hurting from the U.S.-Sino trade conflict are bound to see their exports weaken the coming months due to the outbreak in China, IHS Markit said on Monday.

Releasing its final Purchasing Managers’ Index (PMI) for manufacturing, Markit said the outbreak in China – Germany’s largest trading partner – would also hurt business sentiment in Europe’s biggest economy.

Still, the survey found that the manufacturing sector contracted at the slowest pace in 11 months in January on slower falls in new orders and export sales.

IHS Markit’s PMI for manufacturing, which accounts for about a fifth of the economy, rose to 45.3 after falling in December.

The figure was higher than a flash reading of 45.2 but remained below the 50.0 mark separating growth from contraction for a 13th month in a row.

“The recent improvement in manufacturers’ expectations extended into January, with firms noting the influence of easing trade tensions and the prospect of a revival in exports,” said Phil Smith, economist at IHS Markit.

Despite the improvement in orders and export sales, employment and output remained deep in contraction, highlighting the challenges still facing German manufacturers.

Smith said those challenges are likely to be exacerbated by the coronavirus outbreak.

“The picture has change somewhat in the short space of time since the survey was conducted, with the disruption to business in China from the coronavirus bound to have an impact,” he said.

German Economy Minister Peter Altmaier said last week it was too early to tell how the coronavirus could impact the German economy.

China, which is struggling to contain the epidemic, said economic growth may drop to 5% or even lower due to the outbreak.

(Reporting by Joseph Nasr; Editing by Toby Chopra)

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