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German private sector growth slows at start of new year: PMI

[BERLIN] Activity in Germany's private sector decelerated at the start of 2016 but its steady expansion continued, a survey showed on Friday, suggesting Europe's largest economy is withstanding a slowdown in emerging markets.

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, fell to 54.5 from 55.5 in December.

That reading was comfortably above the 50 line that separates growth from contraction and marked a 33rd month of continuous expansion.

But the January readings signalled a slowdown after strong December showings and fell short of expectations, coming in below two Reuters consensus forecasts for the manufacturing and services sub-indices. "We've seen stronger growth during the fourth quarter in Germany but it's too early to say whether this is likely to be an ongoing slowdown," Markit's senior economist Rob Dobson said.

Boosted by private consumption, Europe's biggest economy grew by 0.25 per cent in the last quarter of 2015, but sliding commodity prices and an uncertain global economic backdrop pose risks to German exporters.

Slackening growth in emerging markets, particularly China, might be a drain on the German economy, Dobson said, but a stable labour market and the European Central Bank's monetary stimulus are likely to support further growth.

Backlogs of work kept piling up for the sixth month running in January, in a sign that German companies have work left to do in fulfilling many outstanding orders.

In the manufacturing sector, output dropped to its lowest reading since May 2015, while input prices were at their lowest level in a year, aided by minimal inflation and rock-bottom oil and energy prices.

Germany's service providers saw a continuation of rising new orders and their 12-month outlook improved again, to its most optimistic reading since early 2011.