The manufacturing recession is starting to take its toll on prices too
The print itself was bad enough already - near seven-year lows - but the details arguably paint a much bleaker picture of the German economy.
The report outlines that new orders declined once again and this time at a rate only surpassed twice before this decade - both of which were earlier this year (March and April 2019). A sharp decline in new export orders was the main reason once again but overall manufacturing output was seen declining for a seventh month in a row as well.
However, one of the key issues outlined by Markit is that the manufacturing recession is starting to spill over to price/inflation as well.
Average purchase prices declined for a fourth consecutive month, led by a drop in purchases and the rate of decline in input prices was the quickest since March 2016.
Here is Markit's take on the matter:
"Germany's manufacturing PMI held close to a seven-year low in August as new orders continued to fall sharply and the production of goods was scaled back once again. Furthermore, a marked drop in firms' output expectations to a record low suggests that things could even get worse before they get better.
The slump in Germany's manufacturing sector goes on and, with no light at the end of the tunnel just yet, the number of goods producers cutting staff numbers continues to rise, boding ill for domestic demand.
Manufacturing is now not only in recession, but the PMI data also point to deflationary forces building with regard to producer prices as supply outstrips demand."
As the deterioration in conditions here starts to spill over to the services sector and inflationary pressures, it'll start resulting in massive pressure for the ECB and the German government to step up policy measures to bolster the economy.
Judging from the above, it looks like things will continue to get worse for Germany before they will get any better.
