March 24, 2014 / 8:36 AM / 6 years ago

Germany's private sector growth slows in March - PMI

BERLIN (Reuters) - Germany’s private sector grew in March but at a slower rate than the previous month as both manufacturing and services industry activity expanded less than expected, surveys showed on Monday.

Robot arms work on a Porsche Macan's body at the new plant in the eastern German city of Leipzig February 5, 2014. REUTERS/Tobias Schwarz

Markit’s preliminary composite Purchasing Managers’ Index(PMI), which tracks activity in the manufacturing and services sectors and covers more than two-thirds of the euro zone’s largest economy, eased to 55.0 in March from February’s 56.4, which was the highest in more than 2-1/2 years.

The reading was the lowest since December but still well above the 50 mark denoting growth. It was the 11th straight month above that line.

“Even despite the wobble in March, Germany is still very much spearheading the European upturn,” Markit economist Chris Williamson said.

Markit is forecasting first-quarter GDP growth in Germany of 0.7 percent after 0.4 percent in the last three months of 2013, Williamson said.

Worries about the Ukraine crisis and its impact on business and energy provision likely played a role in the slowdown from the previous month, he added.

“All important for full-year growth is whether or not the slowdown extends into the second quarter. Much may depend on Ukraine and sanctions and worries about energy.”

Markit’s current forecast is for 2014 German economic growth of 2 percent, slightly above the government’s estimate of 1.8 percent and fivefold the 0.4 percent registered last year.

Germany’s economy has weathered the region’s debt crisis better than its peers but has lost momentum over the past two years. Growth is seen picking up in 2014, driven by domestic demand.

Recent economic data has been upbeat as well as forward-looking sentiment surveys, with the mood among consumers and businesses hitting multi-year highs.

A sub-index for business activity in the services sector dropped to 54.0 in March from 55.9 the previous month, the lowest forecast in a Reuters poll of economists. The consensus forecast had been for it to inch down to 55.5.

The sub-index for the manufacturing sector also fell, dropping to 53.8 from 54.8 and undershooting the consensus forecast for 54.6. It was the lowest reading in four months.

Output prices were stagnant across the private sector and even fell among manufacturers for the first time since August.

“The fact pricing power is so weak in Germany will definitely be a concern to the people already worried about deflation pressures,” said Markit’s Williamson.

Reporting by Sarah Marsh; Editing by Hugh Lawson

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