German Private Sector Growth Picks Up

(RTTNews) - Germany's private sector growth picked up in February as services activity showed a steady expansion and manufacturing contracted at the slowest pace in two years, flash survey data from S&P Global revealed Friday. The flash composite output index came in at 51.0 in February, up from 50.5 in January. This was the highest reading in nine months and was above forecast of 50.8. A score above 50.0 indicates expansion in the sector.

There was a sustained upturn in the services sector, where business activity climbed for three successive months. The services Purchasing Managers' Index fell to 52.2 from 52.5. The score was slightly below economists' forecast of 52.4.

Manufacturing continued to weigh on the overall performance but its drag on private sector growth eased as factory output recorded its slowest rate of contraction since May last year.

The manufacturing PMI registered 46.1 in February, up from 45.0 in January. The reading was expected to climb to 45.4. New business logged only a moderate decrease and that was the weakest in the current nine-month sequence of contraction. The lack of new business to replace completed projects meant that backlogs of work fell further.

Employment decreased at a faster pace in February as the increase in workforce in services offset deeper cuts in manufacturing.

Overall input cost inflation dropped from January's 22-month peak. Output price inflation ticked down from its recent high. This masked a fractional uptick in the rate of increase in prices charged for services to the highest for a year. Businesses' growth expectations for the forthcoming year were revised down in February, after hitting an eight-month high in January. Concerns about tariffs and the general geopolitical backdrop damped sentiment.

"Overall, the economy seems to be back on a growth path, at least for the first two months of the year," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

"Looking ahead, much of the mood will depend on the capability of the new to be elected government to signal stability and to take bold measures," de la Rubia added.