German services growth strengthens in March, PMI shows

[BERLIN] Growth in Germany's services sector accelerated further in March, a survey showed on Wednesday, suggesting Europe's largest economy will post healthy growth in the first quarter.

Markit's final services index rose to a 15-month high of 55.6 from 54.4 in February, helped by new business in the post and telecommunication sector and the renting, business activities and financial intermediation branch.

Markit's final composite Purchasing Managers' Index (PMI), which tracks the activity in manufacturing and services that together account for more than two-thirds of the economy, rose to 57.1 from 56.1 in February to reach a 70-month high.

Markit's final PMI for manufacturing on Monday showed growth had accelerated at the strongest rate in nearly six years in March. It suggested manufacturing would contribute to overall growth in the first quarter.

Wednesday's results similarly suggest services, which are not historically a German strength, would also contribute to growth.

Services providers recorded the strongest expansion in new work since February 2016. It was the second straight monthly acceleration after three months of slowing growth.

"The final services PMI data for March completed a picture of strengthening economic growth in Germany in the opening quarter of 2017," Markit economist Trevor Balchin said.

He added that the data reinforced Markit's full-year growth forecast of 1.9 per cent this year for Europe's largest economy.

Services companies faced higher input costs linked to salaries and fuel prices. Input inflation rose for the sixth time in seven months, reaching a five-year high, which led to the biggest increases in the price of services since July 2008.

Despite inflation pressures, service providers were most optimistic about their 12-month business outlook in six years.

Their optimism was reflected in increased hiring. Job creation rose at the fastest rate since November 2010 and for the 41st month in a row.

However, the hiring drive was not enough to offset pressure on capacity - outstanding business rose for the second consecutive month at the highest rate since June 2016.

REUTERS