September data signalled a deepening of the recent downturn in the German manufacturing sector, as clients cut back demand in response to the unfavourable economic outlook and concerns over the latest global financial market turmoil. New export orders were particularly hard hit in September, with the rate of contraction the steepest since October 2001. Once the main engine of growth in the manufacturing sector, there were reports that export demand from the US, the UK and key Eurozone trading partners fell sharply at the end of the third quarter. At 47.4 in September, down from 49.7 in August, the seasonally adjusted Markit/BME Purchasing Managers’ Index® (PMI®) – designed to give a single-figure snapshot of operating conditions in the manufacturing economy – was below the neutral 50.0 mark for a second month running and at its lowest level since June 2003. The latest deterioration in overall business conditions primarily reflected substantial falls in output and new work. September’s drop in incoming new business was the fastest since mid-2003 and broad-based across the three market groups. Fewer new order intakes led to the most marked reduction of unfinished business since the series began in September 2002. Despite making significant inroads into their levels of work-in-hand (but not yet completed), German manufacturers indicated that production levels declined at the steepest rate for six years. Sector data signalled that the fastest fall in output was at intermediate goods producing firms.