German business activity rises at fastest rate since February
Staff Writer |
German business activity grew at the fastest rate for six months in August, according to the latest PMI survey data from IHS Markit.
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Adjusted for seasonality, the level of private sector output in the eurozone’s largest member state rose markedly, supported by stronger growth of new business and driving an acceleration in the rate of job creation.
However, there were also signs of increasing inflationary pressures, with average prices charged for goods and services rising one of the fastest rates ever recorded by the survey.
August also saw a renewed slowdown in export order growth to the weakest in over two years.
The IHS Markit Flash Germany Composite Output Index registered 55.7 in August, up from 55.0 in July and its highest reading since February.
An acceleration in the rate of service sector business activity growth to a six-month high was the driving factor behind the improved performance midway through the third quarter.
Manufacturing output continued to increase strongly and at a rate that was unchanged from that seen in July.
While business conditions continued to improve across the manufacturing sector in August, the rate of expansion was weaker than in the previous month.
August saw slightly slower increases in both new orders and employment across the goodsproducing sector, with the former growing at a more moderate pace partly due to the weaker expansion in export orders.
Accordingly, the IHS Markit Flash Germany Manufacturing PMI fell back from July’s two-month high of 56.9 to 56.1, its second-lowest reading in the past 20 months (albeit one that was still considerably higher than the long-run series average).
A decline in stocks of purchases and a reduction in the incidence of supplier delivery delays also contributed to the lower headline number in August.
Nevertheless, stronger demand in the service sector offset the loss of momentum recorded in manufacturing, with total inflows of new business rising at the quickest rate since February.
It was a similar picture on the employment front, where the overall rate of job creation picked up to the fastest for seven months thanks to a strong and accelerated increase in service sector staffing numbers.
That said, it was manufacturing that continued to record the quicker rate of employment growth overall.
Rising workloads were reflected in a further increase in the level of backlogs of work in August.
However, the rate of accumulation was only modest having eased to the weakest since January 2017.
Latest data meanwhile showed an intensification of inflationary pressures across the German economy.
Average prices charged for goods and services rose sharply and at a rate that was only just below January’s record high.
Notably, the increase in service sector output charges was the secondsteepest seen since the series began over 21 years ago.
Surveyed businesses generally reported raising output prices in order to pass on part of the burden of higher input costs, which likewise displayed the quickest rate of inflation since the opening month of the year.
According the survey’s anecdotal evidence, the main drivers of the increase in input prices were salary pressures and higher raw material costs.
Business confidence towards the outlook for activity over the next 12 months improved to the highest in four months in August, albeit with the degree of optimism remaining well below the levels seen at the turn of the year.
Stronger future expectations among service providers contrasted with a slight weakening of confidence in the manufacturing sector. ■