November 23, 2018 / 8:40 AM / 23 days ago

German private sector growth falls to four-year low - PMI

BERLIN, (Reuters) - German private sector growth slowed more than expected to reach its lowest level in nearly four years as factories in Europe’s largest economy churned out goods at a slower pace and activity in services also ebbed, a survey showed on Friday.

FILE PHOTO: The sun sets behind the financial district early evening in Frankfurt, Germany, October 10, 2018. REUTERS/Kai Pfaffenbach/File Photo

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that together account for more than two-thirds of the economy, fell to 52.2 from 53.4 in October.

The November reading was the lowest since December 2014 and undershot an analyst forecast for a dip to 53.2.

Chris Williamson from IHS Markit said the data suggested that the German economy was losing steam, but he also added that the contraction in the third quarter was likely just a blip.

“The underlining economic situation in Germany is still healthy. So the overall picture is that of weaker growth, not a recession,” Williamson said.

The German government expects the economy to grow by 1.8 percent this year and next which would be below the calendar-adjusted expansion rate of 2.5 percent in 2017.

The PMI sub-index for manufacturing fell to 51.6 in November from 52.2 in the previous month, missing market expectations for a stable reading.

Manufacturers reported weaker demand from China, Italy and Turkey, with the sector recording the biggest monthly drop in new exports orders for almost six years, IHS Markit said.

Services business activity also decreased, with Markit’s sub-index for the sector falling to 53.3 from 54.7 in October. This was also weaker than analysts had predicted.

The Bundesbank said on Monday that German growth would rebound after a poor third quarter as the economy works through one-off issues that held it back through the summer months.

The contraction is widely blamed on weakness in the car industry, which is struggling to adjust to new emission testing requirements.

Reporting by Michael Nienaber; Editing by Toby Chopra

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