German service providers reported a further rise in business activity in August, although the pace of
expansion slowed since the previous month. Employment also rose at a weaker rate, while new business continued to increase. Meanwhile, business sentiment fell to the lowest level in nearly one year.
The seasonally adjusted Markit Germany Services Business Activity Index fell from July‟s 37-month high of 56.7 to 54.9, thereby signalling a strong, albeit weaker rise in German service sector output. Business activity has now risen for 15 consecutive months and the rate of growth remained above the long-run series average of 53.0. Surveyed companies linked higher activity to the processing of backlogs and increased new orders. Out of the six monitored sub-sectors, Transport & Storage companies signalled the sharpest rise in output. The headline index reading followed an earlier „flash‟ estimate of 56.4.
Meanwhile, total private sector output expanded at the slowest pace in 10 months, as highlighted by the final Markit Germany Composite Output Index – which measures the combined output of the manufacturing and service sectors – falling from July‟s 55.7 to 53.7. Nevertheless, the latest index reading was above its long-run average of 53.0.
Private sector employment rose for a tenth straight month, albeit at the weakest rate since March. New business received by German service sector companies continued to increase in August, and the rate of growth picked up slightly since July.
Panelists generally linked higher volumes of new work to successful acquisitions and stronger demand.
With output and new orders rising further, German service providers hired additional workers in August. The rate of job creation eased, however, and was the slowest in five months. Some companies increased their staffing levels in order to reduce backlogs of work.
Indeed, the level of unfinished work in Germany‟s service sector fell further in August. Work outstanding has now declined continuously on a monthly basis since December last year.
On the price front, input costs in Germany‟s service sector continued to increase in August. However,
the rate of input price inflation eased since July and was the weakest in over four years. Some
panellists linked the weaker inflation to competitive market conditions and lower borrowing costs. Rising staff costs meanwhile contributed to the overall increase.
August data signalled a further marginal rise in prices charged by German service providers. The rate of charge inflation was the weakest since April, with the vast majority of the survey panel reporting
no change since July. The level of positive sentiment towards the business outlook fell to an 11-month low, which some companies linked to a weakening domestic economy, the introduction of a minimum wage and rising global insecurity.
Commenting on the final Markit Germany PMI® survey data, Oliver Kolodseike, economist at Markit and author of the report said: “Germany’s service sector sustained its strong growth momentum in August, although activity growth slowed since the previous month. New business continued to flood in, but companies were relatively cautious about their staffing levels, with employment rising only slightly.
“Total private sector output meanwhile expanded at the slowest pace since October last year and job
creation also weakened. Our survey respondents partly linked slower growth to a weakening economic environment, with some panelists also mentioning heightened geopolitical tensions.
“The Composite PMI data are currently still signalling an expansion in German GDP in the third quarter, following the surprise drop in Q2. It is, however, very unlikely that growth will be as strong
as seen in the opening three months of the year.”
This news is courtesy of http://www.markiteconomics.com/
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