Germany’s service sector started the third quarter on a robust footing, with business activity growth solid overall and little-changed from June’s fourmonth high.
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Moreover, new business increased at the fastest rate in nine months.
The latest survey revealed further marked inflationary pressures, however, as output prices rose at the strongest rate in the survey’s 21-year history.
The seasonally adjusted IHS Markit Germany Services PMI Business Activity Index registered 54.1 in July, down only fractionally from 54.5 in June.
The latest reading signalled a solid overall rise in business activity, albeit one that was marginally weaker than the trend shown over the past year-and-a-half.
Service sector activity has risen continuously since June 2013.
By sector, the strongest rise in activity was seen in Hotels & Restaurants, closely followed by Post & Telecommunication.
The only sector not to record growth was Other Services, where activity was largely flat.
The final IHS Markit Germany Composite Output Index meanwhile ticked up to 55.0 in July from 54.8 in June, signalling the strongest private sector activity growth since March.
This reflected a sharper increase in manufacturing production, the first acceleration on a month-on-month basis since April.
New business expansion in the German service sector strengthened further in July, having previously hit a 20-month low in May.
The rate of new business growth was the quickest seen October 2017.
Moreover, growth in new work remained broad-based across all six sub-sectors monitored.
Service sector employment in Germany continued to expand at a historically strong rate at the start of the second half of 2018.
Surveyed firms reported taking on additional staff to be able to able to meet higher demand.
The rate of job creation was unchanged from June’s five-month high.
The service sector workforce has expanded every month since November 2013.
Faster growth of new business contributed to another rise in outstanding work in July.
Backlogs at service providers have risen ten times in the past 11 months, and the latest increase was the fastest since April.
Input price inflation accelerated in July, linked to salaries, fuel and higher road tolls.
The rate of increase in average input costs was the jointhighest since April 2011.
In order to protect margins, businesses raised their output charges to the greatest extent ever recorded since the survey began in June 1997.
By sector, charge inflation was strongest in Transport & Storage and Hotels & Restaurants respectively.
German service providers maintained a positive outlook towards activity in the next 12 months, linked to expanded customer bases, new markets and attractive service offerings.
That said, the degree of sentiment eased for the fourth time in five months, and was the third-weakest since December 2016. ■