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German private sector grows at slowest pace in 18 months in Dec: PMI

Tuesday, December 16, 2014 - 16:56

[BERLIN] Germany's private sector grew at the slowest pace in 18 months in December as a pickup in manufacturing activity failed to offset declining momentum in services, a survey showed on Tuesday.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks activity in the manufacturing and services sectors that account for more than two-thirds of the economy, fell to 51.4 in December from a final reading of 51.7 in November.

That was above the 50 line denoting growth for the 20th month running, but it was the lowest reading since June last year and far below levels seen earlier this year. New business fell for a second consecutive month, with the subindex coming in at 49.0.

The PMI index tracking services alone fell to a 17-month low of 51.4 from a final reading last month of 52.1, well below the consensus forecast in a Reuters poll of 52.5.

The index for the manufacturing sector however rose to 51.2 from 49.5 in November, above a forecast for 50.4. "Manufacturing needs to continue to move in the right direction to avoid further weakness in the service sector feeding through and dragging the whole economy down," said Markit economist Chris Williamson.

Some firms said airline strikes and nationwide rail strikes that lasted several days had hit their performance. The introduction of a minimum wage from January also hit optimism in the service sector, where a business expectations subindex dropped to 51.3, the second-lowest level in two years. "In order to say firms are expecting a good year ahead and the recovery is looking good, you would you would look for a figure of around 60 or so in expectations," Williamson added.

The German economy grew by just 0.1 per cent in the third quarter of 2014, narrowly avoiding recession thanks to a strong rise in consumer spending and a small boost from foreign trade. "Overall, the data are consistent with only marginal GDP growth in the fourth quarter at best... the possibility of a renewed downturn at the start of next year is clearly becoming more and more likely," said Markit economist Oliver Kolodseike.

REUTERS

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