German manufacturing slows for third month

German manufacturing contracted for a third straight month in December and looked unlikely to provide a lift to Europe's largest economy soon as new orders continued to dry up, a survey showed.

The purchasing managers' index (PMI) for the sector by Markit showed a slight improvement, edging up to 48.1 from 47.9 in November, but it remained well below the 50 mark separating growth from contraction.

With economic headwinds picking up in the wake of Europe's sovereign debt crisis and slackening global demand, the figures left economists sceptical of whether a downturn could be avoided.

A forward-looking sub-index tracking new orders added to the downbeat picture for the months ahead, rising only slightly to 43.9 from 43.2 in what marked another strong contraction.

"Incoming new orders in manufacturing, and exports, are still falling at a very steep pace," said Chris Williamson at Markit. "Much steeper than the rate of decline in output suggests is necessary at this stage."

"What is worrying is that the rate of decline is only being stopped from falling further by companies eating into their backlogs of work," he added, referring to survey details.

Germany's export-driven economy recovered quickly from the 2008/09 financial crisis but the outlook has darkened as euro zone debt worries have begun to weigh on the real economy.

Domestic demand helped it grow a healthy 0.5 per cent in the third quarter, but investor morale has since soured, fuelling expectations of a sharp slowdown going into the new year.