BERLIN (Reuters) - German factories shifted into a higher gear in August propelled by a sharp rise in output, new orders and export business, a survey showed on Friday, suggesting Europe’s largest economy is firing on all cylinders in the third quarter.
IHS Markit’s Purchasing Managers’ Index for manufacturing, which accounts for about a fifth of the German economy, rebounded to 59.3 in August - the third-highest reading since April 2011 - from July’s five-month-low of 58.1.
The reading was above the 50 line that separates growth from contraction but slightly lower than the flash reading of 59.4.
“Output and new orders increased at faster rates, while employment growth remained historically sharp,” said Trevor Balchin, Economics Director at IHS Markit.
New orders rose for the 33rd consecutive month, while strong demand in Asia helped new export business to rise at its fastest pace since May 2010.
Backlogs of work rose at one of the quickest rates in the survey’s history and suppliers’ delivery times lengthened the greatest extent since April 2011.
This prompted firms to take on more staff to handle output, particularly in the intermediate and investment goods sectors.
The German economy expanded by 2.0 percent on the year in the first quarter and by 2.1 percent in the second, driven by soaring private consumption, increased state spending and higher industrial output.
Balchin said the manufacturing data pointed to stronger-than-previously-expected German growth in 2017. IHS Markit is forecasting the economy to expand by 2.3 percent this year and 2.1 percent in 2018.
Reporting by Caroline Copley; Editing by Toby Chopra