German business activity rises faster than expected – IHS Markit

Europe’s traditional summer vacation season did nothing to slow growth in Germany this month, judging from a series of closely-watched surveys, which showed business activity rebounding strongly after a relatively disappointing July.

The composite purchasing managers’ index for the German economy, which economists had expected to stay steady, increased from 54.7 to 55.7.

The country’s powerhouse manufacturing sector once again drove the increase, with the sub-index for the sector jumping from 58.1 to 59.5, defying expectations of a decline. However, survey respondents in the services sector were also feeling more positive, with an increase from 53.1 to 53.4 representing the first rise in growth since March.

The better than expected reports follow similarly positive readings from neighbouring France released earlier this morning.

The PMI surveys question firms on measures such as new business, recruitment and inventories to give a picture of the overall health of different sectors, and are seen as useful early idnicators of economic growth.

IHS Markit, which compiles the surveys, said employment rose particularly “sharply” over the month, despite Germany’s economy already enjoying record employment levels. IHS senior economist Trevor Balchin said the strong results suggest Germany’s full-year economic growth is likely to come in even higher than current forecasts for a 2 per cent increase.

Mr Balchin added:

Underlying economic growth remains strong following a slight correction at the start of the third quarter. Moreover, output growth strengthened in both the manufacturing and service sectors. Notably, manufacturing new export orders increased at the fastest rate since May 2010.