German Private Sector Expands Modestly In June

Germany’s private sector expanded for the third straight month in June, though the pace of growth was weak amid a solid and accelerated drop in manufacturing production, the preliminary results of the purchasing managers’ survey by S&P Global showed on Friday.

The flash composite output index dropped to 50.6 in June from May’s 12-month high of 52.4. Meanwhile, the score was expected to climb to 52.7. Nonetheless, a score above 50 indicates expansion.

The services Purchasing Managers’ Index fell to a two-month low of 53.5 in June from 54.2 in the previous month. Economists had forecast the index to rise to 54.4.

The manufacturing sector continued the downturn in June, with the PMI falling to 43.4 in June from 45.4 in May and remained below forecast of 46.4.

New orders received by the German private sector firms signaled a renewed decline in May as factory orders fell sharply, which was offset by a moderate rise seen in the case of services.

Meanwhile, export orders were strong on the back of increased demand for services.

Private sector employment decreased for the first time in three months, though slightly overall. There was another round of job creation seen across the service sector, while the decline in factory payroll numbers extended further.

The survey revealed that there were faster decreases in backlogs of work in both monitored sectors amid signs of a general lack of pressure on business capacity.

On the price front, output price inflation ticked up slightly in June from a 40-month low in May as service inflation remained well above its historical series average despite a slowdown in the rate of increase in input costs.

Looking ahead, the degree of business optimism eased somewhat from May’s 27-month high as the services confidence retreating to its lowest since January, while manufacturing confidence was unchanged from last month.

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