German private sector set for strong growth in early 2016: PMI

[BERLIN] Germany's private sector expanded at its fastest pace in nearly 1-1/2 years in December, a survey showed on Wednesday, with growth in new business suggesting companies were set for a strong start to 2016.

Markit's final composite Purchasing Managers' Index, which tracks activity in the manufacturing and services sectors that together account for more than two-thirds of the economy, rose to 55.5 in December from 55.2 the previous month.

That was well above the 50 line that separates expansion from contraction for the 32nd month running and also higher than a preliminary flash estimate of 54.9.

Service sector activity hit a 17-month high as new business continued to grow at a robust pace and firms in this sector were feeling more optimistic about their outlook for the next 12 months than at any point since March 2015. "The combination of strongly rising new business levels and a further accumulation of work outstanding suggests that companies will remain in expansion mode as we move into 2016," said Markit economist Oliver Kolodseike.

To handle the strong inflow of new business and growing backlogs of work, service providers stepped up hiring, sending the rate of job creation to its highest level since June 2011.

The unemployment rate in Germany is at 6.3 percent, its lowest level since reunification in 1990, and Kolodseike said the PMI data suggested it could drop even further.

The positive service and composite PMI readings come on the back of a survey of manufacturers earlier this week which showed factory activity rising at the end of 2015.

REUTERS