German service sector growth points to higher Q4 GDP

Posted on November 23, 2016

Germany’s dominant services sector grew at a healthy clip in November, according to a closely-watched business survey, which suggests Europe’s largest economy will pick up from an unexpected slump in growth in the third quarter.

Services, which make up nearly 70 per cent of the German economy, reported higher levels of activity this month, pushing IHS Markit’s purchasing managers’ index (PMI) to a six-month high in November.

The survey, which measures output, employment and expectations in the private sector, hit 55 in November, climbing from October’s 54.2 and better than economists had forecast.

November’s PMI figures point towards more robust growth in the German economy after growth slowed unexpectedly to a pace of 0.2 per cent in the third quarter having started the year at an impressive rate of 0.7 per cent.

Growth was pushed down by a slowdown in foreign trade in the three months to September and fell below the eurozone average of 0.3 per cent in the third quarter.

Markit’s manufacturing index for Germany fell this month compared to October’s 33-month high but at 54.4 it remains well above the 50 level that separates growth from contraction.

With Germany’s unemployment level at a post-reunification low, the survey reported another healthy month for private sector job creation which has expanded for the last three years.

The overall composite PMI for Germany slipped slightly to 54.9 from 55.1 – a two-month low.

“The latest survey results highlight that Germany’s private sector economy remains in good shape in November”, said Oliver Kolodseike at IHS Markit

“The data suggest that economic growth has picked up from the meagre 0.2 per cent rate in the third quarter,” said Mr Kolodseike.

Chart courtesy of Bloomberg

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