Germany’s private-sector growth is on track for its strongest quarter in two and a half years, a survey showed on Thursday, as humming factories in Europe’s biggest economy offset a slight slowdown in activity at services companies in December.
Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, edged down to 54.8 in December from 55.0 in November.
That was in line with the consensus forecast in a Reuters poll and comfortably above the 50 mark that separates growth from contraction.
Together with a reading of 55.1 in October, the PMI data for the final three months of 2016 pointed to the strongest quarter since the second quarter of 2014, IHS Markit said.
The survey showed activity among manufacturers accelerated more strongly than expected to 55.5, a 35-month high, thanks to a rise in goods production, an uptick in new orders and as firms increased their stocks of purchases.
“Germany’s manufacturing sector appears to be in particularly good health,” said Philip Leake, an economist at IHS Markit.
“Encouragingly, goods producers look to be preparing for further sales in 2017 as stocks of purchases were built up for the first time since October 2014,” Leake said.
While activity among services companies grew at its slowest rate since September and below the Reuters consensus forecast, firms remained optimistic, pointing to a further increase in activity in 2017.
Businesses are facing mounting cost pressures, however, as the weaker euro puts upward pressure on commodity prices. The rate of input-price inflation reaching its highest level in five and a half years.
The PMI survey added to other data suggesting company executives are shaking off the political uncertainty sparked by Britain’s decision to leave the European Union and the election of Donald Trump as U.S. president.
Business morale remained buoyant in Germany in November, while German analysts and investors also stayed relatively upbeat about the economy’s growth prospects.
IHS Markit Chief Economist Chris Williamson said the PMI data pointed to an acceleration of German growth to around 0.5 percent or higher in the fourth quarter. This would mark a sharp rebound after Germany’s quarterly growth rate halved to 0.2 percent in the third quarter as exports weakened.
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