August 23, 2017 / 7:36 AM / in 3 months

German factories drive solid private sector growth in August: PMI

BERLIN - Germany’s private sector grew at a faster pace in August as humming factories shifted into a higher gear, a survey showed on Wednesday, suggesting that Europe’s biggest economy is likely to continue its robust upswing in the third quarter.

FILE PHOTO - An employee of German car manufacturer Mercedes Benz observes the connection between the bodywork and the chassis of an A class (A-Klasse) model at their production line at the factory in Rastatt, Germany, January 22, 2016. REUTERS/Kai Pfaffenbach/File Photo

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, rose to 55.7 from its 10-month-low of 54.7 in the previous month.

This beat the consensus forecast in a Reuters poll of economists, who had expected a stable reading. It was also well above the 50 mark that separates growth from contraction.

The stronger-than-expected headline figure showed that underlying growth remains strong, IHS Markit Associate Director Andrew Harker said, adding that he expected a quarterly growth rate of roughly 0.5 percent for the July-September period.

The German economy expanded by 0.7 percent in the first quarter and by 0.6 percent in the second, driven by soaring private consumption, increased state spending and higher industrial output.

Harker said Markit was likely to raise its growth forecast for 2017 from its latest projection of 2.0 percent. The German economy grew by 1.9 percent last year.

Growth in manufacturing accelerated to 59.4 in August, the third-highest reading in more than six years, the survey showed. Analysts had expected the sector to lose some steam.

Services business activity also increased, with Markit’s sub-index for the sector rising to 53.4. This was slightly better than analysts had predicted.

New export orders at goods-producing companies jumped by the sharpest rate in more than seven years, with survey panellists pointing to especially strong demand from Asia, Markit said.

“The recent appreciation of the euro doesn’t seem to have an impact on German exports,” Harker said, adding that this also applied to the emissions scandal engulfing German car makers.

Another survey published by the ZEW research institute on Tuesday showed that the mood among German investors fell for the third month running, amid concern that the emissions scandal could damage the economy in the medium term.

The sentiment surveys from ZEW and Markit will be followed by the closely watched Ifo business climate index on Friday. Analysts expect the indicator to fall after it reached successive record highs from May to July.

Reporting by Michael Nienaber, editing by Larry King

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