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German manufacturers appear to have put the worst of a year-long slump behind.

IHS Markit’s Purchasing Managers’ Index for German industry rose to 43.8 in November. That’s the highest in five months and exceeds economist estimates for a reading of 42.8. While output continued to shrink, it proved less of a drag on the economy’s overall performance.

The euro, which rose after French numbers earlier on Friday, extended its gain on the German report. It was up 0.2% to $1.1077 as of 9:32 a.m. Frankfurt time.

“Manufacturing remains firmly in contraction,” said Phil Smith, an economist at IHS Markit. “But many of the indicators here are at least moving in the right direction and it would seem the worst of the downturn is over, barring any shocks.”

The picture is consistent with the Bundesbank’s assessment earlier this week that the German economy will probably stagnate in the fourth quarter. The nation narrowly averted a recession, but there’s little indication of a rebound any time soon.

In November, the private-sector economy showed no job growth after employment declined slightly in the previous month. Yet survey data “at least point to support to consumer spending from low inflation and rising wages,” according to Smith.

Business confidence across manufacturing and services is also improving. After being hit hard by trade tensions and Brexit, expectations for output in a year’s time turned positive for the first time in four months.

--With assistance from Simbarashe Gumbo and Mark Evans.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow

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