German private sector returns to growth, April composite PMI shows

(Sharecast News) - Germany's private sector beat expectations and showed a surprise return to growth in April, according to flash estimates from a widely-read survey on Tuesday. The HCOB German Flash composite purchasing managers' index (PMI) rose above the critical 50 mark for the first time in 10 months , hitting 50.5 compared with 47.7 in March. This also beat estimates of 48.5.

The composite PMI index tracks the services and manufacturing sectors.

The manufacturing PMI index rose to 42.2 from 41.9 in the previous month, although the reading was below the forecast of 42.8 in a Reuters poll.

"Although manufacturing remained in contraction, the rate of decline in factory production eased and confidence amongst goods producers towards the outlook reached the highest for a year. On the price front, rates of both input cost and output price inflation ticked up, but they nevertheless registered broadly in line with their respective long-run averages," HCOB said.

The index for the service sector rose to 53.3 this month from 50.1 in March, also its highest in 10 months and above a forecast of 50.5.

"Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2% in the second quarter, following an estimated 0.1% growth in the first quarter," said Cyrus de la Rubia, chief economist at HCOB.

"The service sector may serve as a catalyst for the overall economy. Services companies show a good amount of self-confidence. This is reflected in their pricing strategies, among other factors. It indicates their belief that they can pass on the recent increase in input prices to customers to a greater extent than previously."

"This stands in contrast to companies in the manufacturing sector, where sales prices remain under pressure."

Reporting by Frank Prenesti for Sharecast.com