Strong activity in German services pushes up inflation: PMI

BERLIN (Reuters) – Germany&rsquo-s services enjoyed vibrant activity in August, pushing up price pressures in the sector and boosting overall private sector growth, a survey showed on Tuesday, suggesting that a solid upswing in Europe&rsquo-s biggest economy is set to continue.

Markit&rsquo-s final composite Purchasing Managers&rsquo- Index (PMI), which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, rose to 55.8 from its ten-month low of 54.7 in July.

The reading was well above the 50 line that separates growth from contraction and came in slightly better than a preliminary estimate of 55.7 which was published last month.

The main support came from manufacturing where growth accelerated at the fastest pace since April, propelled by a sharp rise in output, new orders and export business.

In the services sector, business activity increased to reach a two-month high of 53.5 in August, with orders coming in at a faster pace. Service providers continued to hire new staff, though job creation slowed to reach its slowest pace in more than a year.

In a sign that the upswing is pushing up inflation, cost pressures faced by German service providers increased.

The rate of input price inflation picked up to reach a five-month high while prices charged by service providers accelerated at the fastest pace since March.

IHS Markit economist Trevor Balchin said that the survey data underlined the German economy&rsquo-s continued strength.

IHS Markit had therefore raised its growth forecasts for 2017 and 2018 to 2.3 percent and 2.1 percent respectively.

The government predicts calendar-adjusted growth of 1.9 percent for 2017. That would be on a par with last year&rsquo-s performance, which was the strongest among the G7 group of the world&rsquo-s most industrialized countries.