German private sector growth slows to 16-month low in Sept: PMI

[BERLIN] Growth in Germany's private sector slowed to a 16-month low in September, hampered by a near-stagnation of output in services, a survey showed on Friday, suggesting Europe's biggest economy may have lost momentum in the third quarter.

Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, fell to 52.7 in September from 53.3 in August.

This was below the Reuters forecast for 53.4 but remained above the 50 mark that separates growth from contraction.

Growth in the manufacturing sector accelerated to a three-month high, pointing to ongoing solid growth, while output in the services sector fell unexpectedly to the lowest level in more than three years.

"A big concern is the divergent trends within the economy, with service providers struggling to eke out any meaningful growth," said Markit economist Oliver Kolodseike. "The PMI points to the weakest rise in business activity since the summer of 2013."

The rosy picture for manufacturers contrasts with other recent data that showed growth in industrial orders nearly halted in July and factory output and exports fell unexpectedly.

In the PMI survey, firms noted the strongest rise in new export orders since the beginning of 2014, citing higher demand from Asia and the United States.

This suggests that exports may strengthen a little bit more than expected later in the year, although not to a substantial degree, Markit economist Rob Dawson told reporters.

Service providers were hit by weak inflows of new business and a fall in backlogs of work. "Today's survey data are a clear indication that German economic growth has slowed in the third quarter," said Mr Kolodseike.

Strong private consumption, higher state spending and rising construction activity helped the economy to grow by 0.7 per cent in the first quarter and by 0.4 per cent in the second.

But it is expected to lose steam in the second half of this year, hampered by sluggish foreign demand which the finance ministry believes will subdue factory output.

REUTERS