Germany’s private sector expansion gains steam in November

Manufacturing and services performing better than expected

Manufacturing, which had a weak start to the year, picked up the pace in November.

Manufacturing, which had a weak start to the year, picked up the pace in November.

Thu, Nov 21, 2013, 08:53

Germany’s private sector has grown faster in November, with manufacturing and services performing better than expected, a survey showed today, suggesting Europe’s largest economy is steadily expanding.

Markit’s preliminary composite Purchasing Managers’ Index (PMI), which tracks growth in the manufacturing and services sectors and covers more than two-thirds of the economy, rose to 54.3 in November from 53.2 the previous month.

The index was comfortably above the 50 mark that separates growth from contraction and was at its highest level since January, marking its seventh straight month of growth.

The survey points to German gross domestic product (GDP) growing by 0.5 per cent on the quarter between October and December, Markit’s chief economist Chris Williamson said.

Europe’s economic powerhouse stagnated in the first quarter of 2013 and though it achieved bumper growth of 0.7 per cent in the second quarter, preliminary data shows it expanded just 0.3 per cent between July and September as exports weighed.

“November’s survey suggests that the German economy has built up a head of steam through the final quarter of 2013 and is well on track to achieve growth of close to 0.5 per cent for the calendar year,” said Tim Moore, senior economist at Markit.

That is in line with the government’s forecast for economic expansion this year.

“There are also signs that solid growth momentum should be sustained over the months ahead, as new business received by private sector firms increased at the steepest pace for almost two-and-a-half years,” he added.

Manufacturing, which had a weak start to the year, picked up the pace in November. A sub-index tracking the sector, which makes up about a fifth of the economy, climbed to 52.5 from 51.7 in October - above the consensus forecast in a Reuters poll for 52.0 - as factories churned out more goods and took on more new orders.

Bookings from abroad increased and manufacturers benefited from improved margins as factory-gate prices rose more sharply than their costs, but despite these bright spots, they cut jobs for an eighth consecutive month in a sign of lingering caution.

The services sector fared well, with a sub-index rising more than forecast to 54.5 as firms’ order books were fuller and backlogs of work increased, and business expectations improved, albeit less steeply than last month. Service providers therefore recruited more staff after cutting jobs last month.

But service firms’ margins were squeezed as output prices dropped while input prices rose. (Reuters)