German private sector pick-up points to Q1 expansion

[BERLIN] Growth in Germany's private sector picked up slightly in February, a survey showed on Wednesday, signalling Europe's largest economy will keep expanding in the first quarter after ending 2014 on a high note.

Markit's final composite Purchasing Managers' Index (PMI), which tracks activity in the manufacturing and services sectors accounting for more than two-thirds of the economy, edged up to a four-month high of 53.8 in February, from 53.5 in January.

That was comfortably above the 50 mark dividing growth from contraction for a 22nd consecutive month but lower than a preliminary estimate of 54.3.

Markit economist Oliver Kolodseike said the survey pointed to a "two-speed economy" in Germany, with the service sector growing more strongly than manufacturing.

"Nevertheless, survey data for the first quarter so far suggest that we should expect another quarter of solid gross domestic product (GDP) growth," he said.

Services gained traction in February, with a sub-index tracking this sector hitting a five-month high of 54.7 as new business flowed in at a faster pace. Firms hired new staff for a 16th consecutive month but their margins were hit as input prices rose more steeply than output prices.

Service providers were less upbeat about their prospects over the next 12 months than in January, but their morale remained at a high level overall.

Other recent surveys have also suggested Germany could grow briskly in early 2015, with business and investor morale heading north. Retail sales have surged and unemployment has fallen, while inflation is low - all positive signs for private consumption, which is expected to drive growth this year.

REUTERS