By Daniel Hunter
Adjusted for seasonal influences, the Markit Flash Germany Composite Output Index registered 52.6 during October, down from 53.2 in September but still above the 50.0 value that separates expansion from contraction. The latest reading pointed to a moderate increase in private sector output, with the overall rate of growth the least marked since July.
Slower overall growth of private sector output largely reflected a weaker expansion of services business activity. While service sector output growth eased to a three-month low, the latest rise in manufacturing production was slightly stronger than that seen during September.
October data suggested that new business volumes rose for the fourth consecutive month. However, the rate of expansion was only marginal and slipped to its slowest since July. This reflected a weaker contribution from services, as manufacturing new order growth was in line with that seen during the previous month. That said, manufacturing new export work increased only marginally and at the slowest rate in the current three-month period of expansion.
Volumes of unfinished work were broadly unchanged in October, contrasting with a moderate reduction during the previous month. Despite the stabilisation in outstanding business, private sector workforce numbers were reduced slightly during the latest survey period. Lower employment contrasted with job creation during the previous month, and reflected lower staffing levels in both the manufacturing and service sectors.
A solid rate of input price inflation persisted in October, thereby extending the current period of rising cost burdens to four months. The latest increase in input prices was the fastest for a year and partly driven by a return to cost inflation in the manufacturing sector. There were signs of pressure on manufacturing supply chains as average lead times from vendor lengthened for the third month running and to the greatest degree since July 2011.
Despite a further increase in private sector input costs, latest data indicated that output charges were broadly unchanged during October. That said, there were divergent trends between manufacturers and service providers, with the former reporting a rise in factory gate prices and the latter indicating a reduction for the first time since April.
Tim Moore, Senior Economist at Markit and author of the Flash Germany PMI, said: “Germany’s private sector started the final quarter of 2013 in a positive fashion as manufacturing and service sector output levels both increased from those seen during September. A slower rate of expansion in services activity meant that overall growth eased slightly from the trend recorded over the third quarter.
“However, the stronger manufacturing outturn during October is a signal that the Germany’s resilient economic performance has continued this autumn, while sustained gains in new orders suggest that private sector companies will remain on a growth footing in the months ahead.”
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