December 5, 2017 / 9:22 AM / 10 months ago

German political impasse weighs on services sector growth in November - PMI

BERLIN, (Reuters) - German services sector growth slowed to a three-month low in November, a survey showed on

German Chancellor Angela Merkel attends the 5th African Union - European Union (AU-EU) summit in Abidjan, Ivory Coast November 29, 2017. REUTERS/Luc Gnago

Tuesday, as a political impasse following Chancellor Angela Merkel’s failure to form a new three-way coalition clouded the outlook for business.

The sector remains on a “solid but unspectacular” growth path despite the fall, IHS Markit said, adding that the average reading for the fourth quarter so far was above that of the

July-September period.

Its final Purchasing Managers’ Index (PMI) for services fell to 54.3 from 54.7 in October, remaining well above the 50 mark that separates growth from contraction. The reading came in

weaker than a flash estimate of 54.9, which had shown a slight pickup in momentum.

There have been concerns that prolonged political uncertainty in Berlin could damage confidence in an economy that has been growing since 2010 and even picked up momentum in the

third quarter.

Merkel, weakened by losses her conservatives suffered at the hands of the far-right in a September election, has turned to the centre-left Social Democrats (SPD) after talks on an

alliance with the left-leaning Greens and pro-business Free Democrats collapsed.

“The impact of the breakdown of coalition talks has had more time to filter through to businesses, and nowhere is this more evident than in the survey’s measure of future expectations, which is two points lower than the flash estimate and at its second-weakest in 2017 so far,” Markit’s Phil Smith said.

This was reflected in a sub-index measuring the outlook for activity falling to a level close to an eight-month low recorded in August.

The slowdown in service sector growth was offset by the robust performance of manufacturing, where the expansion reached its second-fastest level in more than two decades in November.

That resulted in a final composite reading of 57.3, up from 56.6 in October.

Reporting by Joseph Nasr; Editing by Hugh Lawson

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