You are here

German private sector expands in October, eases growth concerns: PMI

Thursday, October 23, 2014 - 15:35

[BERLIN] Germany's private sector grew faster in October as manufacturing rebounded, suggesting Europe's largest economy may be gaining momentum in the fourth quarter, a survey showed on Thursday.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks growth in the manufacturing and services sectors that account for more than two-thirds of the economy, climbed to 54.3 from 54.1 in September.

That was well above the key 50 threshold dividing growth from contraction and also pointed to a slight pick-up in growth momentum. It was driven by expansion in both the services and manufacturing sectors. "The services sector numbers show some fairly decent growth in the domestic market and manufacturing is benefiting from that," said Markit chief economist Chris Williamson.

Manufacturers' order books posted mild growth in October after shrinking in September. Services providers also saw new business increase, albeit at a slightly slower pace than in the previous month.

Germany's economic outlook has deteriorated through 2014 as shown by a slew of grim economic data and weak sentiment gauges, sparking renewed concern for a euro zone that is barely generating any inflation and needs support from its largest economy.

Germany posted a quarterly contraction of 0.2 per cent in the second quarter. Williamson said growth fears were somewhat exaggerated, and he thought special factors such as public holidays had dragged down the second quarter. "We should see a bounce back in the third quarter, it will only be modest, maybe 0.2-0.3 per cent, and that rate of growth will probably have been sustained at the start of the fourth quarter." "It is not as bleak a picture as many official data present for Germany, but it is suggestive of one where German companies are being squeezed," he added.

The subindex for the manufacturing sector rebounded to 51.8 in October from 49.9 in September, easily beating even the most upbeat forecast in a Reuters poll.

The service sector subindex slipped to 54.8 from 55.7, however, and service providers' optimism over the future fell to its lowest level since December 2012.

REUTERS