German private sector growth slowed to a crawl in March as the services sector lost momentum, a survey showed today, suggesting Europe's largest economy grew only moderately in the first quarter.
Markit's final composite Purchasing Manager's Index (PMI), measuring growth in both manufacturing and services sectors and covering more than two-thirds of the economy, fell to 50.6 in March from 53.3 in February.
That was below an initial reading of 51.0 but nonetheless just above the 50 mark that separates growth from contraction.
"Overall, modest German GDP (gross domestic product) growth is likely over the first quarter, but the clear message from monthly survey indicators is that Germany's economic rebound is now diminishing rapidly," said Tim Moore, senior economist at Markit.
Europe's economic powerhouse lost traction in 2012, with slower trade and weaker investment pushing it into contraction in the last three months of the year.
But most economists expect it to avoid a recession by growing minimally in the first quarter.
The PMI survey showed the service sector expansion slowed in March as firms faced a decline in new orders and a 13th straight month of decreasing backlogs of work.
Respondents said concerns about the euro zone's economic prospects led consumers and businesses to rein in spending last month. A sub-index tracking the services sector slid to 50.9 in March from 54.7 the previous month, below an initial estimate of 51.6.
"Service providers registered weaker output growth than the earlier flash reading for March, which underscores their substantial loss of momentum since the beginning of 2013," Mr Moore said.
Companies in the services sector also suffered from a squeeze on their operating margins, with input prices rising much more sharply than output prices on the back of higher wage, fuel and utility costs.
Still, the marginal growth in the services sector was enough to offset a contraction in the manufacturing sector, keeping the private sector overall, covered by the composite index, in positive territory.
The services survey also contained some bright spots, with staffing levels increasing for a fourth month to their highest since August 2012.
In a potentially positive sign for future activity, service providers' business expectations rose to their highest level since June 2011, remaining in positive territory for a fourth month.
Reuters
