German economy set to break through 2% growth hurdle in 2017

[FRANKFURT] German economic growth is set to exceed 2 per cent this year for the first time since 2011 amid increased momentum in manufacturing and services, a report from IHS Markit shows.

A Purchasing Managers' Index for both sectors rose to 55.7 in August from 54.7, the London-based company said in a statement. Economists in a Bloomberg survey predicted an unchanged reading.

With private consumption benefiting from record-low unemployment and robust orders underpinning industrial production, the Bundesbank has already hinted that its June forecast for 2017 growth of 1.9 per cent may be too pessimistic.

The economy expanded 0.6 per cent in the second quarter and an upwardly revised 0.7 per cent in the previous three months.

"Underlying economic growth remains strong," said Trevor Balchin, a senior economist at IHS Markit. "The PMI data for the third quarter so far and the upward revisions to official data suggest that IHS Markit's current growth forecast for 2017 - at 2 per cent - is likely to be raised."

The figures follow an earlier report which showed an unexpectedly strong improvement in French manufacturing. A composite PMI for the euro area is due at 10am Frankfurt time and is forecast to have slipped to 55.5 from 55.7.

BLOOMBERG