Growth in German manufacturing hints at broadening of recovery

Berlin: Germany's services sector expanded at its fastest rate in three years in August, data showed yesterday, pointing to a broadening of recovery in Europe's largest economy as manufacturing growth starts to ease.

Final data for the purchasing managers' index (PMI) survey by Markit showed a headline indicator for the services sector rose to 57.2 from 56.5 in July.

The figure was lower than a flash estimate released last month, which showed a reading of 58.5, but the index still stood at its highest level since August 2007.

Improvements

"Service providers commonly reported that the improved performance of the domestic economy had boosted business and consumer spending in August," Markit said in a statement.

The data took up some of the slack left by a slowing manufacturing sector, which expanded in August at its slowest pace since February on softening demand from overseas, a similar survey showed on Wednesday.

The revision to the overall services figure was at least partly linked to a weaker final reading of the expectations component, which posted a 65.6 reading but had stood almost a percentage point higher in the flash estimate.

Still, even that reading meant that businesses surveyed had expressed their most optimistic outlook since December 2003.

Hiccup

German indicators have rallied recently, pointing to a recovery that is gaining steam despite a hiccup in retail sales, which fell for a second month in a row in July.

Business morale rose to its highest level in more than three years in August, an unexpected gain which boosted confidence Europe's largest economy will keep growing even if some of its neighbours slip back into recession.

Consumer morale is also likely to rise in September to its highest level since October 2009 on upbeat economic news and falling unemployment, the GfK research group said last week.