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German private sector growth slows in August: PMI

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German private sector growth slowed in August, but remained robust overall, a survey showed on Tuesday, suggesting Europe's biggest economy is set to keep on expanding in the summer months after it grew more than expected in the second quarter.

[BERLIN] German private sector growth slowed in August, but remained robust overall, a survey showed on Tuesday, suggesting Europe's biggest economy is set to keep on expanding in the summer months after it grew more than expected in the second quarter.

Markit's flash composite Purchasing Managers' Index, which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, edged down to 54.4 from 55.3 in July.

This came in weaker than a Reuters consensus forecast for a reading of 55.0, but the headline figure was still comfortably above the 50 line that separates growth from contraction.

The survey showed growth in the services sector slowed unexpectedly after it had picked up speed in July, while manufacturing also lost some steam in August following a strong performance in the previous months. "Today's survey results highlight that the German economy is continuing its uninterrupted upward trend in August," Markit Economist Oliver Kolodseike said.

Output, new orders and employment grew at slightly weaker rates than the previous month, however, suggesting that business conditions have become a bit more challenging, he added.

The PMI sub-index for manufacturing inched down to 53.6 as companies reported weaker growth in output and new orders while also hiring new staff at a slower rate.

The sub-index for services dropped to 53.3 which was the lowest level in 15 months. Service providers added fewer staff than in the previous months while their business expectations deteriorated to the lowest level in nearly two years. "It looks like there is some nervousness creeping into the services sector that could translate into weaker growth in coming months", Markit chief economist Chris Williamson said.

But he added that the overall picture remained encouraging and that the survey data pointed to a growth rate of 0.5 per cent in the third quarter.

The German economy grew by 0.4 per cent in the second quarter, double the Reuters consensus forecast, as higher exports, strong private consumption and increased state spending compensated for weaker investment in construction and machinery.

For 2016 as a whole, the government expects the economy to expand by 1.7 per cent, on a par with last year which was the strongest growth rate in four years.

REUTERS