German economic growth near 3-year high as manufacturing gains

[FRANKFURT] Output in Germany, Europe's largest economy, accelerated in February as goods production and services activity gained momentum.

A composite Purchasing Managers' Index climbed to 56.1 from 54.8 in January, the strongest reading in almost three years, IHS Markit said on Tuesday. Economists predicted the gauge would remain unchanged. Gains in manufacturing were the highest in almost six years, while services "rose solidly".

"The latest PMI data are encouraging following the slightly weaker-than-expected preliminary estimate of GDP growth" last quarter, said Trevor Balchin, a senior economist at the London-based company.

"That said, this figure was influenced by strong imports and could understate underlying momentum. The latest PMI adds to our expectations that economic growth will strengthen in the first quarter."

The German economy expanded 0.4 per cent in the final three months of 2016, but a flurry of data have pointed to stronger overall momentum as unemployment hit a record low at the start of the year and price gains accelerated.

The Bundesbank sees growth picking up in the first quarter on the back of higher exports and a long-awaited recovery in the global economy.

The outlook of private-sector companies improved to the highest level since data were first collected in 2012, IHS Markit said.

The figures follow an earlier report which showed unexpectedly strong improvements in the French economy. A composite PMI for the euro area is due at 10 am. Frankfurt time and is forecast to have slipped to 54.3 from 54.4.

BLOOMBERG