German Growth Unexpectedly Picks Up In June as Services Rebound

(Bloomberg) -- Germany’s private-sector economic growth unexpectedly gathered pace in June, driven by an increase in services activity.

A composite purchasing managers’ index by IHS Markit climbed to 54.2 from a 20-month low of 53.4 in May. That exceeded the median estimate in a Bloomberg survey for an unchanged reading.

German Growth Unexpectedly Picks Up In June as Services Rebound

The survey also showed new order growth and job creation gathered pace. Still, manufacturing continued to lose momentum, growing at the weakest pace in one-and-a-half years, with export orders hurt by a reduction in interest from the U.S and China.

“The headline PMI numbers for Germany make for slightly better reading in June thanks to a pick-up in the pace of expansion in the service sector, though the performance over the second quarter as whole still looks to be one of only modest growth,” said Phil Smith, Principal Economist at IHS Markit.

The data come just a week after European Central Bank officials said they plan to end bond purchases this year, signalling the institution’s first steps on the path away from extraordinary stimulus.

That announcement came despite evidence that the euro area economy has lost some of its expansionary pace. Following the ECB’s meeting last week, President Mario Draghi said that the recent “soft patch” may last longer, but that didn’t change the view of underlying momentum.

Markit’s composite PMI for the euro area, due to be published later on Thursday, is forecast by economists to weaken to 53.9 from 54.1. An earlier reading for France unexpectedly climbed to 55.6.

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