Service sector activity growth in Germany hits highest in nearly seven years
Staff Writer |
Germany’s service sector shifted into a higher gear at the start of 2018, as business activity growth accelerated to the fastest in nearly seven years and job creation also gathered pace, the latest PMI survey data from IHS Markit signalled.
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The survey also showed a pick-up in inflationary pressures in January, with firms reacting to a sharp rise in costs by hiking prices charged to the greatest extent in nine-and-a-half years.
The seasonally adjusted final IHS Markit Germany Services PMI Business Activity Index rose to 57.3 in January, up from 55.8 in December (and also above the earlier ‘flash’ estimate of 57.0).
It was the highest reading since March 2011.
A sharp and accelerated increase in output within Renting & Business Activities was a key factor underpinning the tertiary sector’s upturn, while Hotels & Restaurants and Post & Telecommunications also showed stronger underlying rates of expansion.
The final IHS Markit Germany Composite Output Index ticked up to an 81-month of 59.0 in January, from 58.9 in December.
Stronger services activity growth offset a slower but still sharp increase in manufacturing output.
The level of new business received by services firms rose at the fastest rate for three months in January.
This continued a sequence of uninterrupted growth stretching back more than three years.
The main boost to demand came from the domestic market, according to the survey, linked in a number of cases to an improving economy.
The pick-up in activity meanwhile led to more jobs being created across the services sector, with January seeing the steepest rise in employment for nine months.
Notwithstanding the extra staffing capacity, backlogs of work at service providers increased for a fifth straight month in January, albeit only modestly overall.
Another key focal point of the latest survey results was an intensification of inflationary pressures.
Average prices charged by services firms were shown to have risen to the greatest extent in nineand-a-half years, as a backdrop of supportive demand conditions coincided with a steep and accelerated rise in businesses’ input costs.
The rate of input price inflation faced by services firms was the highest since April 2011 and well above that seen on average over the survey’s 20- year history.
Where an increase in total cost burdens was recorded in January, companies linked this to a combination of salary pressures, higher oil and fuel prices and rising rental fees.
Despite heightened cost pressures, firms operating in the service sector maintained a strongly positive outlook towards activity in the year ahead.
The degree of optimism was unchanged from that recorded in the preceding month and among the highest seen over the past six-and-half years. ■