Rebound in German services lifts private sector growth – PMI

FILE PHOTO: VW re-starts Europe's largest car factory after coronavirus shutdown
FILE PHOTO: A worker wears a protective mask at the Volkswagen assembly line after VW re-starts Europe's largest car factory after coronavirus shutdown in Wolfsburg, Germany, April 27, 2020, as the spread of the coronavirus disease (COVID-19) continues. Swen Pfoertner/Pool via REUTERS

June 3, 2021

BERLIN (Reuters) – German services returned to growth in May, helped by falling coronavirus infections and a loosening of COVID-19 restrictions, lifting overall private sector output in Europe’s largest economy, a survey showed on Thursday.

IHS Markit’s final Purchasing Managers’ Index (PMI) of activity in the services sector jumped to 52.8 from 49.9 in April.

The final composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, rose to 56.2 in May from 55.8 in the previous month.

Both readings were in line with flash estimates released last month.

“Germany’s service sector started to revive in May, buoyed by the partial easing of lockdown measures and a surge in new business as progress in the vaccine rollout helped spur confidence and demand,” IHS economist Phil Smith said.

The survey revealed growing cost pressures in the service sector which are expected to push up overall consumer price inflation in the coming months.

“While more services firms are starting to raise prices, the full extent of the cost pressures across sector is by no means reflected in the rate of output charge inflation,” Smith said.

Many services businesses have so far absorbed higher costs but they are now facing a rapid rebound of pent-up demand which should enable them to pass on increased costs to consumers through higher prices, he added.

(Reporting by Michael Nienaber; Editing by Toby Chopra)