German factories humming, growth near 6-year high

[BERLIN] German manufacturing expanded at the strongest rate in nearly six years in February, a survey showed on Wednesday, suggesting factories will push up overall growth in Europe's biggest economy at the start of 2017.

Markit's Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose to 56.8 from 56.4 in January.

It was the highest reading since May 2011 and above the 50 line that separates growth from contraction for the 27th consecutive month. The final figure came in slightly weaker than a flash reading, however.

"The survey results suggest that manufacturing will contribute to a strengthening in overall economic growth in the first quarter," IHS Markit economist Trevor Balchin said.

Germany's quarterly growth rate was likely to rise to "at least" 0.6 per cent in the first three months of 2017 from 0.4 per cent in the final three months of 2016, Mr Balchin added.

The survey showed growth rates for output, new orders, exports and purchasing all improved, with manufacturing new orders rising at the strongest rate in just over three years.

Companies in the goods-producing sector reported increased demand from both domestic and export customers, with Europe and Asia mentioned as main sources of growth.

Cost pressures continued to intensify in February, with the rate of input price inflation accelerating further to reach its highest in nearly six years. Managers reported increased prices for metals and oil-based products.

"This fed through to output prices charged by manufacturers which rose at the fastest pace since June 2011," Mr Balchin said.

IHS Markit's Balchin forecast economic growth for Germany of 1.9 per cent for 2017 as a whole.

REUTERS