German factory Markit's output sees a welcomed boost

Growth in Germany’s private sector picked up in February to reach its highest level in nearly three years, driven by humming factories, a survey showed, pointing to a strong first quarter in Europe’s biggest economy.

Markit’s flash composite Purchasing Managers’ Index (PMI), rose to 56.1 from 54.8 in January.

The index tracks activity in manufacturing and services, which account for more than two-thirds of the German economy.

The reading, comfortably above the 50 line that separates growth from contraction, marked a 34-month high. IHS Markit economist Chris Williamson said the data suggested the German economy was likely to increase 0.6% in the first three months of 2017 after expanding 0.4% in the final quarter of 2016.

“This is a broad-based upturn driven by manufacturing, but also helped by Germany’s solid labour market,” Mr Williamson said.

French business activity unexpectedly matched that in big beast Germany just as its presidential race heats up. At 56.2, France’s PMI combining both manufacturing and services for February was the highest it has been in nearly six years.

The German survey showed growth in manufacturing accelerated for the third consecutive month to reach the highest level in nearly six years. In the service sector, business activity accelerated more strongly than expected to hit a three-month high.

Reflecting stronger growth in output and new business, firms continued to hire more staff in February, with the overall German rate of job creation picking up to reach its highest since June 2011.

The survey also signalled the sharpest increase in both input and output prices since mid-2011, pointing to rising inflation pressure in the euro zone’s biggest economy.

German inflation picked up further in January, to 1.9% from 1.7% in December, to reach a three-and-a-half-year high and touch the ECB’s target for price stability of just under 2%.

The German economy rose 1.9% last year, the strongest rate in five years, driven by private consumption, increased state spending on roads and refugees and rising investment in housing.

This year, the government expects weaker growth of 1.4%, mainly because of weaker exports and fewer workdays. The Bundesbank has said in its latest monthly report that the economy will stay on a strong footing due to high industrial and construction activity.

  • Reuters


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