BERLIN, July 1 Reuters The downturn in Germany39;s manufacturing sector, which accounts for about a fifth of Europe39;s biggest economy, experienced a fresh setback in June as output and new orders declined at a faster pace, a survey showed on Monday.

The HCOB final Purchasing Managers39; Index PMI for German manufacturing fell to 43.5 in June from 45.4 in May, confirming a preliminary flash estimate and remaining below the 50 level that separates growth from contraction.

The accelerated fall in new orders and especially export orders indicates that we will have to wait some more months until a recovery in the manufacturing sector can be seen, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

One likely explanation for the weak exports orders is increasing competition from China, which is ramping up its exports worldwide due to sluggish domestic demand, he added.

This situation creates a double whammy for German exporters, de la Rubia said, noting firms were facing fewer exports to China at the same time as heightened competition from Chinese products, especially in emerging markets.

The destocking cycle showed no signs of turning as firms reported deepening declines in both pre and postproduction inventories.

However, companies were more optimistic about the future than they were in May, with sentiment hitting the highest since February 2022.

Anecdotal evidence highlighted hopes of a pickup in exports, increased investment and a general…