|German Private Sector Growing|
German private sector companies reported solid activity growth at the start of the second quarter, as highlighted by the Markit Flash Germany Composite Output Index rising from 54.3 in March to 56.3.
The latest reading was the second-highest in nearly three years and stretched the current period of growth to 12 months. Survey participants commented that an improved economic environment and increased order intakes were the main contributors to the latest expansion. The acceleration in output growth was broad-based by sector with both manufacturers and service providers signalling sharper expansions.
Goods producers reported the quickest rise in output for three months (and the second sharpest since mid- 2010), while growth in the service sector reached a two-month high. Growth in new business also picked up in April to an above average pace amid reports of increased domestic and foreign demand plus a general improvement in economic conditions.
Despite easing to a five-month low, new work placed at goods producers increased at a marked pace and service providers reported the fastest rise in order intakes since November last year. In the goods producing sector, new export work continued to increase, with companies mentioning Asia, Europe and the US as sources of growth. The net rise was slightly sharper than in March.
Increased business requirements was one of the main reasons encouraging German private sector companies to hire additional workers during April. The rate of job creation accelerated since the previous month and was down only marginally from February’s 25-month high. Concurrently, backlogs of work were broadly unchanged, having fallen in March. Input costs were unchanged in April, ending a nine-month period of rising prices.
Cost inflation at service providers eased to a 44-month low, while manufacturers signalled the sharpest drop in input prices since July last year, commenting on successful price negotiations, lower raw material prices and increased competition among suppliers.
Meanwhile, companies lowered their output charges fractionally. With output and new orders rising, German manufacturers increased their purchasing activity further, albeit to the weakest extent since last October. Increased demand also led to a reduction in stocks of finished goods.
The fall in inventories was the most marked in just over a year. Meanwhile, business expectations at service providers remained high. Anecdotal evidence suggested that optimism was linked to improved consumer confidence, increased domestic and foreign demand and the ongoing economic recovery.
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Published on our website on April 30, 2014