Germany’s private sector has made a surprising return to growth in April, with the country’s service sector leading the way, according to a preliminary survey released on Tuesday.
The HCOB German Flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 50.5 this month from 47.7 in March, exceeding expectations and marking the first reading above the 50 mark in 10 months. This index tracks the services and manufacturing sectors, which together make up more than two-thirds of the German economy.
Chief economist Cyrus de la Rubia of Hamburg Commercial Bank commented, “Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2% in the second quarter, following an estimated 0.1% growth in the first quarter.”
The service sector saw a significant boost, with its index rising to 53.3 from 50.1 in March, the highest level in 10 months and surpassing forecasts. De la Rubia noted, “The service sector may serve as a catalyst for the overall economy.”
While manufacturing still showed contraction, the rate of decline in factory production slowed, and confidence among goods producers reached its highest level in a year. The manufacturing PMI index rose to 42.2 from 41.9 in the previous month, although slightly below expectations.
The survey also indicated a slight increase in price pressures at the beginning of the second quarter, with both input costs and output prices seeing a modest uptick, in line with their long-run averages.
Overall, the unexpected growth in Germany’s private sector is a positive sign for the country’s economy and may indicate a more robust recovery in the months ahead.