Germany's manufacturing sector appears to be in recession
Germany's manufacturing PMI index for June fell to 38.8.
PMI stands for Purchasing Managers Index. It's a survey of manufacturers that asks whether market conditions are expanding, staying the same, or contracting. If the index comes in at 50, it means that on average conditions are holding steady. Above 50 indicates expansion, below 50 indicates contraction.
The PMI index is very good at predicting recessions, which is why the market pays close attention to it. Here's the graph of German manufacturing PMI since 2008:
Germany is heavily exposed to the Chinese economy - China is Germany's biggest trading partner, dwarfing trade with other eurozone countries and the USA.
The slowdown in the Chinese economy has already shown up in the deteriorating stats coming out of Korea and Japan (who also depend on exports to China), and now we're seeing it in Germany. Because Germany is the engine of the EU, the German slowdown will soon be felt in other EU countries.