German Economy Gets Lift from Services as Manufacturers Struggle

(Bloomberg) --

Output from Germany’s private sector remained unchanged in June, as a decline in manufacturing was offset by continued growth in services.

A flash reading of the country’s composite Purchasing Managers’ Index stayed at 52.6 in June, IHS Markit said on Friday, a slightly better reading than economists had forecast. Manufacturing production contracted for the fifth month in a row, while services continued their strong expansion.

An earlier report showed France’s PMI came in better than expected in June, sending the euro higher. It was up 0.2% after the report.

The improvement in numbers comes days after European Central Bank President Mario Draghi said policy makers will act if the economic situation deteriorates, putting interest-rate cuts and more asset purchases on the table as options. Inflation remains below the ECB’s goal, and it’s concerned a deeper slowdown will further undermine price pressures.

A gauge of new German export business picked up slightly, despite remaining below the key 50 level that indicates expansion. Expectations for output growth were the weakest in over 4 1/2 years, with many companies reporting that they expect an economic slowdown.

“Although the manufacturing downturn continued in June, there are tentative signs that the worst has passed,” said Trevor Balchin, economics director at IHS Markit. “The longer-term outlook for the German private sector remains weak, however.”

To contact the reporter on this story: Jill Ward in London at jward98@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Lucy Meakin

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