Latest PMI survey data from IHS Markit showed a further slowdown in Germany’s private sector, with business activity rising solidly but at the weakest rate for eight months in March.
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Nevertheless, employment continued to rise amid signs of ongoing capacity constraints, with firms also remaining strongly positive towards growth prospects in the year ahead.
The IHS Markit Flash Germany Composite Output Index, which is based on around 85% of usual monthly responses, registered a reading of 55.4 in March, down from 57.6 in February.
Although remaining solid overall, growth has now softened in each of the past two months after having reached a near seven-year high in January.
Services business activity rose at the slowest pace since last August, while manufacturing output showed the weakest increase in 14 months.
This slower expansion in factor output was reflected in a further correction in the IHS Markit Flash Germany Manufacturing PMI, which dipped from 60.6 in February to 58.4 in March, down for the third straight month and its lowest reading since July last year.
Demand for German goods and services also increased more slowly in March.
New order growth remained solid overall and above the longrun trend (since January 1998), but eased for the third month running to its lowest since July 2017.
The slowdown was largely due to a weakening trend in manufacturing order books, which rose at the slowest rate for nearly one-and-a-half years amid softer growth in new export orders (14- month low).
March saw another solid monthly increase in the level of private sector employment in Germany.
The rate of job creation pulled back further from January’s recent peak, but it remained close to the strong average seen during 2017.
Firms mainly took on new staff in order to expand capacity, with latest data showing solid and accelerated increase in level of backlogs of work.
There were a number of reports of difficulty in finding qualified staff, however.
A strongly positive outlook for the year ahead was another factor supporting job creation across the private sector.
Business confidence remained elevated by historical standards despite having moderated further from the end of last year.
Business optimism eased in both the manufacturing and service sectors, falling back to its lowest for 18 months in the former.
On the price front, March saw a further strong increase in average prices charged for goods and services.
The rate of inflation softened to a threemonth low, but it remained higher than at any other point since April 2011.
Manufacturers in particular saw input prices rise sharply during the month, linked in part to an increase in the cost of raw materials, notably steel and wood products.
There were also numerous reports from both goods producers and services firms of salary pressures leading to higher overall costs.
Raw material shortages and capacity bottlenecks in supply chains also helped to drive up manufacturers’ purchase prices during the month, according to the survey’s anecdotal evidence.
Latest data in fact showed the greatest increase in input lead times since the series began in April 1996, just surpassing the previous record set in February. ■