German manufacturing grows in January at fastest rate since May 2011: PMI

BERLIN Mon Feb 3, 2014 3:57am EST

Workers assemble parts at the serial production BMW i3 electric car in the BMW factory in Leipzig September 18, 2013. REUTERS/Fabrizio Bensch

Workers assemble parts at the serial production BMW i3 electric car in the BMW factory in Leipzig September 18, 2013.

Credit: Reuters/Fabrizio Bensch

BERLIN (Reuters) - Rises in new orders, output and employment drove the strongest growth in German manufacturing in January in more than 2-1/2 years, a survey showed on Monday, in a sign Europe's largest economy began the year on a solid footing.

Markit's Purchasing Managers' Index for the German manufacturing sector, which accounts for about a fifth of the economy, rose to 56.5 in January from 54.3 in December, its seventh consecutive month of expansion.

The final reading was the highest since May 2011 and slightly higher than the preliminary estimate of 56.3.

"Germany's manufacturing sector moved up a gear at the beginning of 2014," said Oliver Kolodseike at Markit. "The sharp rise in new work was supported by stronger demand from both domestic and foreign markets, with Asian countries and the United States mentioned as sources of export growth."

The rate of growth in new export business sped up for the third straight month to a 33-month high, the survey showed.

Berlin is relying on domestic demand to support growth again this year as the global outlook improves slowly, but demand from the home market was only enough to drive a 0.4 percent expansion in 2013.

Any revival of foreign demand for "Made in Germany" will be positive news for the traditionally export-oriented economy.

"The German economy looks set for a strong performance in the first quarter of the year," said Kolodseike.

Economists expect the economy, which has been a bastion of strength through the euro zone crisis and outpaced its peers, to grow around 1.7 percent this year. Forward-looking indicators have shown sentiment among consumers, businesses and investors rising to multi-year highs over the past few months.

Official data due out this week is expected to show industrial orders and output rose in December after surging the previous month, Reuters polls of economists show.

The Markit survey showed the rise in new manufacturing orders led in January to stocks of finished goods being further depleted, and backlogs of work building up.

(Reporting By Sarah Marsh; Editing by Hugh Lawson)

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