German growth continues to accelerate

Growth in the eurozone’s private sector unexpectedly slowed in May, while growth in Germany continued to accelerate.

A Purchasing Managers Index slipped to 52.9 from 53 in April, London-based Markit Economics said yesterday.

Economists had predicted an increase to 53.2. A gauge for services activity held at 53.1, while one for manufacturing fell to 52.4 from 52.6. 

The eurozone economy expanded 0.5% in the first quarter, the fastest pace in a year. 

With inflation still absent despite several rate cuts below zero and expansions of asset-purchase programmes, the ECB has become more vocal in urging governments to do their part in underpinning growth.

“The robust pace of economic growth seen in the first quarter will prove temporary,” said Chris Williamson, chief economist at Markit. 

“The survey therefore paints a picture of a region stuck in a low-growth phase, managing to eke out frustratingly modest output and employment gains despite various ECB stimulus ‘bazookas’, a competitive exchange rate, and households benefiting from falling prices.”

New orders grew at the weakest pace since January last year, pointing to subdued output growth next month at best, according to the report. 

Average selling prices continued to decline. 

Still, employment rose for a 19th month.

While PMIs for Germany and France signalled accelerating private-sector growth, expansions elsewhere in the region cooled, said Markit.

In Germany, the private sector accelerated in May to hit the highest level so far this year, suggesting Europe’s largest economy will extend its surprisingly strong start to the year into the second quarter. 

Markit’s flash composite PMI rose to 54.7 in May from 53.6 in April.

This was the highest reading since December 2015 and beat a consensus forecast of 53.8. 

The headline figure was comfortably above the 50 line that separates growth from contraction, as it has been for 37 months.

The survey showed that an upturn in the manufacturing industry gained traction in May while growth in services picked up again after having slowed in April.

The sub-index for business activity in services rose to 55.2, the strongest reading since February, with jobs being created at the fastest rate since December 2015.

Job creation accelerated, with employment growth hitting the highest level so far this year.


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