October 3, 2018 / 8:06 AM / in 8 months

Strong German services growth offsets weak manufacturing in Sept: survey

FILE PHOTO: Owner Mario Ziervogel and his wife Viola sell curried sausage, also known as Curry-wurst, at Ziervogels Kult Curry in Berlin, Germany, April 28, 2015. REUTERS/Stefanie Loos

BERLIN (Reuters) - German services growth hit an eight-month high in September, a survey showed on Wednesday, in a further sign that strong domestic demand is helping to cushion the effects of a slowdown in manufacturing.

IHS Markit’s final composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, fell to 55.0 from 55.6 in August.

The reading came in slightly below a preliminary estimate published last month but was still well above the 50 line that separates growth from contraction.

In the services sector, business activity increased to 55.9 in September, up from 55.0 the previous month, with the rate of job creation hitting its highest in nearly 11 years and service firms remaining very optimistic about future business.

“For the first time in almost two years, the service sector grew at a faster rate than manufacturing, confirming a fundamental shift in the growth drivers of the euro area’s largest economy,” IHS Markit economist Phil Smith said.

German services are benefiting from strong domestic demand thanks to record-high employment, rising real wages, increased job security and low borrowing costs.

Smith said the data pointed to a growth rate of around 0.5 percent in the third quarter.

Reporting by Michael Nienaber; Editing by Hugh Lawson

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