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German private sector expands faster in January: PMI

[BERLIN] Germany's private sector expanded faster in January, but a slight slowdown in growth in manufacturing cast some doubt on the prospects for Europe's largest economy, a survey showed on Friday.

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, rose to 52.6 in January from a final reading of 52.0 in December.

That was above the 50 line denoting growth for the 21st month in a row, but it was far below levels seen early last year.

The index tracking the manufacturing sector dropped slightly to 51.0 from a final reading in December of 51.2. That was below the consensus forecast in a Reuters poll of 51.7.

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The index for the services sector climbed to 52.7 from a final reading last month of 52.1, which was above the consensus forecast in a Reuters poll of 52.5.

"What we can see in manufacturing are some knock-on effects from weakness in neighbouring countries," Markit economist Rob Dobson said, adding that companies also pointed to weaker growth in Asia and the standoff with Russia over Ukraine.

"Still, Germany might sustain its macro-economic growth and that should have some modest benefits to other countries in the eurozone as well," he added.

The ECB's decision to buy sovereign bonds might also lift growth in eurozone countries that Germany trades with, and that could give the German economy an additional boost, he added.

"So there is a possibility that Germany could match its 2014 growth performance this year," Mr Robson said.

The German economy grew by 1.5 per cent last year. The government has forecast growth of 1.3 per cent this year, and coalition sources have told Reuters it is discussing lifting the target to 1.5 per cent.