World Economy

German Private Sector Defies Forecasts

German Private Sector Defies ForecastsGerman Private Sector Defies Forecasts

Growth in Germany’s private sector accelerated in November, a survey showed on Monday, suggesting Europe’s biggest economy is defying worries over a slowdown in China and the emissions scandal at car maker Volkswagen.

Markit’s flash composite Purchasing Managers’ Index, which tracks manufacturing and services activity and accounts for more than two-thirds of the economy, rose to 54.9 from 54.2 in October–far above the 50 mark that separates growth from contraction for the 31st month running, Reuters reported.

Chris Williamson, chief economist at Markit, said the German economy was running on a “business as usual” basis with no discernible effects from the VW crisis.

The data pointed to further modest, albeit unspectacular growth in the fourth quarter, Markit economist Oliver Kolodseike said.

The subindex for the manufacturing sector showed growth hit a three-month high. Output decreased for the third month in a row, but backlogs of work piled up.

New export orders and employment rose to their highest readings in three months, suggesting demand from abroad remained strong despite broad concerns about the global economy.

The PMI survey also showed a significant increase in activity in the services sector in November, with new business rising to its highest reading in nearly four years.

 Recruitment Up

Moreover, the services sector showed its most optimistic assessment of recruitment in almost two years, supported by an increase in business expectations compared with last month’s reading.

“I think given the amount of stimulus in the economy that’s aimed at the domestic market, it’s not surprising that you’re seeing good service sector growth,” Williamson said.

Economic output picked up and companies reported that new business rose at the fastest pace in two years, Bloomberg reported.

The services index reached its strongest reading since September 2014 and a gauge of manufacturing also advanced. Both defied economists’ forecasts for slight declines.

While a slowdown in emerging markets from China to Brazil is weighing on the country’s export-oriented manufacturing sector, record-low unemployment, low interest rates and a weak euro are providing support. The Bundesbank said last month that the growth trend remains strong and European Central Bank president Mario Draghi has left the door open to more stimulus for the euro region in December.

In France, the composite index slipped to 51.3 from 52.6, Markit said. Services growth cooled, with hotels and restaurants reporting a negative impact from the terrorist attacks in Paris.