German Factories Work at Record Speed as Strong 2017 Concludes

(Bloomberg) -- Germany is set to end the year with a further acceleration in economic growth, bolstered by an unprecedented expansion in manufacturing.

A Purchasing Managers’ Index of factory activity unexpectedly jumped to 63.3 in December from 62.5 in November, IHS Markit said on Thursday. That’s the highest level since the survey began in early 1996. A composite gauge that also includes services rose to 58.7 from 57.3, the strongest reading in more than six and a half years.

With unemployment at a record low, solid global demand for its exports and continued support from expansionary European Central Bank policy, the region’s largest economy is brushing off any uncertainty related to Chancellor Angela Merkel’s struggle to form a new government. Gross domestic product probably expanded 2.6 percent in 2017, according to IHS Markit.

The December PMI results “are the icing on the cake for what has been a strong year for the German economy,” said Phil Smith, an economist at the London-based company.

Factory output, hiring intentions and new orders were all at or near record highs, according to the report. Confidence rebounded strongly after a breakdown in coalition talks weighed on optimism in November.

“ This injection of optimism helped support further employment growth, with job creation running at close to the highest seen in the past six and a half years,” said Smith.

To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow, Paul Gordon

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