German manufacturing just slumped to the lowest level since the financial crisis - and it's a major warning sign for the global economy
- US and European stock markets fell after a survey of German manufacturers delivered its lowest reading since the financial crisis.
- The German PMI fell from 47.6 in February to 44.7 in March due to sharp declines in new orders, lower work backlogs, and firings.
- France's PMI data also fell as demand for exports tumbled amid yellow-vest protests and turmoil during the Algerian elections.
- You can see all of Business Insider's coverage of Germany's economic crisis here.
Stocks tumbled on Friday after a closely watched survey of German manufacturers delivered its lowest reading since the financial crisis.
Germany's manufacturing Purchasing Managers' Index (PMI) plunged from 47.6 in February to 44.7 in March. A survey reading below 50 indicates a contraction in activity.
The "alarming slide remains driven by a steady deterioration in new orders which fell at their quickest rate since 2012 thanks to persistent weakness in the auto sector and delayed decision making - probably in part due to Brexit uncertainty - among many clients." said Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics.
"Manufacturers shed workers in March, for the first time in three years," he added. "The manufacturing PMI has swung from a sizzling 63.3 in December 2017 to a low not seen since the financial crisis."
It's another blow for the struggling German economy, after narrowly avoiding recession at the end of 2018.
The country is being battered by numerous external and internal factors, including the ongoing slump in global manufacturing, continued trade tensions between the US and China, stuttering demand for Germany's key export, cars, and record low water levels on the Rhine river, which has hurt industrial production.
He anticipates further proof of a manufacturing recession in first-quarter industrial production reports.
The composite PMI in France also fell from 50.4 in February to 48.7 in March, below the consensus forecast of 50.7. The manufacturing sector reading dropped from 51.5 to 49.8, while the services PMI slipped from 50.4 to 48.7.
The dropoff in France was driven by sluggish growth in new orders, especially in the export sector where demand tumbled at its fastest rate in three years. Survey respondents blamed disruption from yellow-vest protests and turmoil during the Algerian elections, according to Vistesen. Work backlogs also declined at their fastest rate in six years.
"The PMI isn't a very good indicator for growth in France, but it is certainly sounding the alarm at present," Vistesen said.
Here's the market roundup as of 10.05 a.m. (6.05 a.m. ET):
- European equities are in the red. France's CAC 40 and Britain's FTSE 100 are both down 0.9%, the Euro Stoxx 50 is down 0.8%, and Germany's DAX is down 0.5%.
- US stock markets are set to open lower, with Dow, S&P 500, and Nasdaq futures all down by around 0.5%.
- Asian stocks closed flat, with China's Shanghai Composite Index, Japan's Nikkei, and Hong Kong's Hang Seng all within 0.2% of their opening levels.