Signs German manufacturing is steadying may be 'false dawn' - IHS Markit

A downturn in Germany's manufacturing sector eased further in February but the prospect of disruptions to supply chains as a result of the coronavirus means the promising data could be misleading, IHS Markit said on Monday.

Releasing its final February Purchasing Managers' Index (PMI) for manufacturing, IHS Markit said the sector managed to creep closer to stabilisation "as declines in output and overall new orders eased, helped by signs of firmer domestic demand".

The PMI for manufacturing, which accounts for about a fifth of the economy, rose to 48.0 in February from 45.3 in January.

The figure was higher than a flash reading of 47.8 but remained below the 50 mark that separates expansion from contraction for the 14th consecutive month.

IHS economist Phil Smith said "should disruptions continue in China and even spread to other economies, as is looking increasingly likely given the recent news flow, then we could see supply- and demand-side constraints come into effect and the decline in production accelerate anew."

"As such, there's a sense that February's slightly more positive results could merely be a false dawn," he added.

In a sign of the challenges facing the sector, a sub-index on new export orders slumped to 46.1 in February from 49.6.

German Economy Minister Peter Altmaier said last week he expected the coronavirus outbreak to have only a limited effect on the global economy, but he added that much depended on how the situation develops.

(Writing by Paul Carrel; Editing by Hugh Lawson)