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German economy "going great guns" as growth picks up further in Nov

[BERLIN] Germany's private sector shifted into an even higher gear in November as factories churned out goods at the fastest pace in nearly seven years, a survey showed on Thursday, suggesting Europe's biggest economy is firing on all cylinders.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, rose to 57.6 from 56.6 in the previous month.

That beat the consensus forecast in a Reuters poll of economists who expected a broadly stable reading. It was also well above the 50 mark that separates growth from contraction.

"The German economy is going great guns, with manufacturing enjoying one of the best growth spurts seen over the past two decades," IHS Markit economist Phil Smith said.

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The subindex for manufacturing jumped to 62.5 in November, the highest reading since February 2011 and the second-greatest improvement in business conditions since 1996 when the survey was started, IHS Markit said. Analysts polled by Reuters had expected the sector to lose some steam.

"Demand for plant and machinery is surging," IHS Markit economist Chris Williamson said. "Business investment in the euro area is really kicking higher and of course Germany, being a major producer of business machines, is riding this tide." The stronger-than-expected PMI figures for November suggest the economy will grow 0.9 per cent on the quarter from October to December, Mr Williamson added.

Services business activity also increased in November, with Markit's subindex for the sector rising to 54.9. This was slightly weaker than analysts had predicted.

In a sign that the strong upswing is pushing up inflationary pressure due to capacity constraints and record delivery delays, output prices rose the fastest in six-and-half years.

"There is a clear indication for hawks (among European Central Bank policymakers) that core price pressures are building," Mr Williamson said.

Another survey published by the ZEW research institute last week showed that the mood among German investors improved further in November.

The sentiment surveys from ZEW and Markit will be followed by the closely watched Ifo business climate index on Friday. Analysts expect the indicator to edge down after the breakdown of political talks on forming a new coalition government.

REUTERS

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