German manufacturing output contracts again in May - PMIGerman manufacturing output contracts again in May - PMI
FILE PHOTO: Employees of German car manufacturer Porsche work on a Porsche 911 at the Porsche factory in Stuttgart-Zuffenhausen

BERLIN (Reuters) – Germany’s manufacturing sector continued to contract in May as factories facing weak demand because of the coronavirus pandemic laid off staff, according to a survey published on Monday that showed businesses were pessimistic about the future.

IHS Markit’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Europe’s biggest economy, rose to 36.6 from 34.5 in April. The flash reading was 36.8.

“Even though more factories have started to resume operations after the loosening of restrictions, weak underlying demand is still a limiting factor, as evidenced by the survey’s measure of new orders rebounding far less than that of output in May,” said Phil Smith, principal economist at IHS Markit.

“Manufacturing production was already down 7-8% from a peak in late 2017 even before the onset of the pandemic, and now that figure looks to be in the region of 25-30%.”

Output declined more slowly than in April, but with firms operating well below full capacity and pessimistic about future output, factory staff cuts accelerated to their fastest pace in 11 years, with the investment goods sector hit especially hard.

(Reporting by Joseph Nasr; Editing by Catherine Evans)