January 4, 2019 / 9:02 AM / 5 months ago

German services sector caught cold after winter chill hits manufacturing -Markit

BERLIN, Jan 4 (Reuters) - - A drop in both new orders and business confidence slowed growth in Germany’s services sector to a 27-month low in December, a survey showed on Friday, adding to signs that Europe’s largest economy is cooling.

Markit’s final services index fell to 51.8 from 53.3 in November, also lower than a flash reading of 52.5 and edging closer to the 50.0 mark that separates growth from contraction.

Germany’s manufacturing sector has also been weakening. Growth there slowed to a 33-month low in December as new orders fell at the fastest rate in four years, data published on Wednesday showed.

“In Germany, when the manufacturing sector sneezes, there’s a good chance the rest of the economy will catch a cold, and that seems to be what’s happened in the service sector in the final quarter of 2018,” said IHS Markit’s Phil Smith.

The composite index fell to 51.6, down from 52.3 in November and lower than a flash reading of 52.2.

The data reflect a sustained slowdown in an economy that shrank in the third quarter, partly on one-off effects such as fewer car registrations as automakers adapt to new pollution standards.

Germany is also facing headwinds from trade frictions between the United States and China, weaker demand from the euro zone and risks linked to the possibility of Britain leaving the European Union in March without a deal.

“Alongside the lingering uncertainties towards Brexit and trade wars, worries about a general slowdown in the economy have helped undermine business confidence across the service sector, with expectations towards the outlook sliding to their lowest for over three years,” Smith said.

He added that, while the pace of job creation had eased, many manufacturing and services companies were taking on new staff. This should boost consumption and help offset those headwinds in the near term.

Reporting by Joseph Nasr; editing by John Stonestreet; joseph.nasr@thomsonreuters.com; +49 30 2888 5085; Reuters Messaging: joseph.nasr.reuters.com@reuters.net

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