Germany's debilitating manufacturing recession now in its first month is seeing more German workers being fired from their jobs even as a return to growth remains far over the horizon.
Analysts fear the manufacturing recession in this heavily export-dependent country will infect the wider German economy by early 2020 while also adding to the woes of already weak economies across the eurozone.
The slump in the European Union's largest economy is showing clear signs of broadening with employment falling for the first time in six years, according to IHS Markit's survey of businesses.
Factory employment has been particularly hard hit. Employment here has plunged by the most in 10 years. IHS Markit's manufacturing and services indices rose slightly in October and confirm the manufacturing slump has extended into the fourth quarter.
The purchasing managers' index (PMI) remains stuck in negative territory and came to 48.6 in October. A number below 50 indicates private sector activity is shrinking. Manufacturing is groaning under a low PMI of 41.9.
"Hopes of a return to growth in Germany in the final quarter have been somewhat dashed," said Phil Smith, an economist at IHS Markit. "Perhaps most concerning are the signs of increasing strain on the domestic economy."
IHS Markit said the outlook for the eurozone remains gloomy and expectations for growth are at their worst since 2013. On the other hand, Bloomberg Economics estimates the eurozone economy might have grown by a mere 0.1% in the third quarter. It said not much improvement in the eurozone is expected in this fourth quarter.
"Those figures are below our estimate of trend growth of between 0.3% to 0.4% a quarter," said Bloomberg. "That means the pace of expansion will be insufficient to keep unemployment falling, pay packets thickening and inflation climbing."
Bloomberg also said there was a decline in confidence across the eurozone but a further softening of inflationary pressures as selling prices rose the least in three years. This outcome is worrisome for the European Central Bank (ECB), which cut interest rates and restarted bond purchases to revive too-low price growth in September.
"German industry is in recession, and this is now also impacting the service providers catering to those companies," said Claus Michelsen, head of forecasting and economic policy at the DIW Berlin.
"The fact that the economy is expanding at all is due primarily to the continuing positive spending mood of private households, which is being buoyed by good wage agreements, tax breaks, and the expansion of government transfers."
