April 23, 2018 / 7:45 AM / a month ago

German private sector outlook deteriorates in April - PMI

BERLIN, (Reuters) - The outlook for business activity in Germany’s private-sector deteriorated to a five-month low in April, a survey showed on Monday, as growth in new orders slowed.

IHS Markit said growth in new orders slumped to a more than 18-month low. New business in the service sector posted the smallest gain since August and manufacturers reported new orders had eased to the lowest level since November 2016.

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, nevertheless rose to 55.3 in April, a two-month high. It had fallen to an eight-month low in March.

Phil Smith, principal economist at IHS Markit, said the slowdown in new order growth raises some concern, as reflected in the survey’s measure of business confidence, which slipped further from the highs of last year.

But overall, he said, the April survey points to a strong start to the April-June quarter.

“Growth of Germany’s private sector steadied in April, to arrest the loss of momentum seen in February and March,” Smith said. “With both manufacturing and services seeing slightly quicker increases in output, the data show the economy making a solid start to the second quarter.”

The reading overshot the consensus forecast in a Reuters poll of economists, remaining well above the 50 mark that separates growth from contraction.

Chris Williamson, chief business economist at IHS Markit, said he expected the German economy, Europe’s biggest, to grow 0.5 percent in the first quarter.

The health of the private sector was best reflected by the employment sub-index, which showed job creation rebounding in April to hit its highest level since January after falling to a seven-month low in March.

“Overall, the picture is still good,” Williamson said.

Industrial production, exports and retail sales declined in the first quarter, signalling that growth had slowed down.

Reporting by Joseph Nasr; Editing by Catherine Evans

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