German services sector activity picks up in March - PMI

German services sector activity grew in March at the fastest pace since last May as demand strengthened and spurred job creation, a business survey showed on Wednesday.

S&P Global's final services Purchasing Managers' Index (PMI) for Germany rose to 53.7 in March from 50.9 in February, climbing well above the 50.0 threshold that separates growth from contraction.

"Germany's service sector enjoyed a positive end to the opening quarter of the year, with the upturn in business activity gathering pace as demand continued to recover from the lull seen towards the end of last year," said Phil Smith, economic associate director at S&P Global.

But he said it remained to be seen whether this was enough to prevent a second consecutive quarterly contraction in GDP, which would fulfill the technical definition of a recession.

"With business confidence stalling in March and manufacturing new orders still under pressure, modest economic growth is probably the best we can hope for in the next quarter," Smith said.

Both the overall rate of input price inflation and the rate at which service providers raised their own prices eased but remained high by historical standards, the survey showed.

"Price increases in the service sector are easing, but even so the rate of inflation remained stubbornly high in March, pointing to persistently strong core price pressures and the potential for yet more interest rate rises," Smith said.

The German composite PMI index, which comprises both the services and manufacturing sectors, rose to 52.6 in March from 50.7 in February. The upturn was driven primarily by the service sector, although there was also modest growth in manufacturing output.

Reuters