German private sector growth slows more than expected in July-PMI

BERLIN (Reuters) - Germany’s private sector grew at a slower pace in July, a survey showed on Monday, linking the weaker activity to factory closures in the summer months following a sustained period of strong growth.

FILE PHOTO: Cargo wagons are parked at a train station in Munich, Germany, May 6, 2015. REUTERS/Michaela Rehle/File Photo

Markit’s flash composite Purchasing Managers’ Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, fell for the second consecutive month to a six-month low of 55.1.

The reading undershot the consensus forecast in a Reuters poll of economists but remained well above the 50 mark that

separates growth from contraction.

Markit said the reading did not by itself suggest Europe’s largest economy was entering a cycle of slower growth.

“You often get some pause in growth rates,” said Markit economist Chris Williamson. “It’s been very strong for some time now, especially in Germany. We are in July (holiday season)...which leads to factory closures.”

Activity in the manufacturing sector slowed slightly, with the index falling to a three-month low of 58.3 from 59.6 a month earlier. The later reading was still among the highest registered in the past six years.

Growth in the services sector slowed to a six-month low of 53.5 from 54.0 in June.

“It doesn’t mean a fundamental slowdown in demand. I wouldn’t worry about it too much,” Williamson said. “Although

we’ve had two (successive) months of slowing growth. If we get a third one it begins to look like we are entering a cycle of slowdown”.

New business received by German firms increased for the 31st consecutive month, driven by strong demand from Europe and Asia.

“The overall picture is one of strong underlying growth. The easing seen in July follows the strongest quarter in six years, and manufacturing continued to expand at a historically sharp rate,” said Markit’s Trevor Balchin.

Despite a slower increase in new orders and faster job growth, delivery times increased at their fastest rate since

April 2011. Both industrial production and exports rose more than expected in May, raising expectations among economists that trade would contribute to overall growth this year.

Markit expects Germany’s economy to expand by 2 percent this year, which would be the highest rate since 2011.

Reporting by Joseph Nasr; editing by John Stonestreet