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German manufacturing activity dropped to its lowest level since 2012 in February according to a closely-watched survey, but the country’s services sector remained resilient.

The purchasing managers' index for the manufacturing sector dropped to 47.6 in February, the lowest level since December 2012 and well below the expectations of analysts polled by Reuters for 49.7. A reading below 50 indicates that a sector is in contraction.

“In terms of the factors behind the slowdown in manufacturing order books, many of the usual suspects — the uncertainty relating to US-China trade tensions and weakness in the autos industry — were highlighted, although there were also reports of growing competitive pressures within Europe” said Phil Smith, an economist at HIS Markit, which compiles the survey.

Low unemployment rate and rising wages lent support to the services sector, however. The services PMI index rose to 55.1 in February, up from 53 in January and above expectations in a Reuters poll of 52.9.

“Strong fundamentals in the domestic market are driving growth in services business activity” said Mr Smith.

The data are closely followed by analysts looking for early signs of either an economic rebound in the eurozone’s largest economy or further deterioration. Germany narrowly avoided a recession at the end of 2018 after registering a contraction in the third quarter of the year and stagnation in the final quarter.

“Measured overall, the data remain indicative of a very modest rate of underlying output growth”, Mr Smith added.

The European Commission earlier revised down Germany’s growth forecast for this year to 1.1 per cent, below the eurozone average and down from the 1.8 per cent that was forecast last autumn.

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