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German private sector grows in October despite worries over China and VW: PMI

[BERLIN] Germany's private sector grew for a 30th month running in October, a survey showed on Friday, suggesting Europe's largest economy got a solid start to the fourth quarter despite concerns about the Volkswagen scandal and a slowdown in China.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks manufacturing and services activity and accounts for more than two-thirds of the German economy, inched up to 54.5 from 54.1 in September - well above the 50 mark that separates growth from contraction.

Chris Williamson, chief economist at Markit, said the latest PMI readings suggested the German economy grew 0.4 per cent in the third quarter and would match that performance in the fourth quarter. But he added that this was discouraging given stimulus from the European Central Bank. "There's no discernable mention of any impact from the VW crisis hitting the manufacturing sector - that seems to have been relatively contained," he said.

The Federal Statistics Office is due to publish preliminary third-quarter gross domestic product on Nov 13.

The manufacturing sector disappointed, with growth slowing to its weakest since May. Domestic and foreign orders slowed from September, with some companies complaining of weaker demand from China and from Russia, which is subject to sanctions from the West because of the Ukraine conflict.

The PMI survey showed activity in the services sector picking up in October, with new orders coming in at the same rate as in September. Backlogs of work piled up and service providers stepped up recruitment slightly.

But business expectations in the services sector fell, which Williamson said was partly caused by the refugee crisis and the VW scandal, though he stressed that neither was affecting employment or activity at the moment.

Staffing levels in the private sector as a whole were a bright spot, with the recruitment rate the strongest in nearly four years.

Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.