Investing.com - German private sector activity picked up to the fastest pace in five months in July, according to survey data released on Tuesday.
The preliminary reading of the Markit manufacturing purchasing managers’ index came in at a three month high of 57.3 this month from 55.9 in June. Economists had forecast a reading of 55.5.
A reading above 50.0 on the index indicates industry expansion, below indicates contraction.
The increase reflected stronger increases in output, new orders and stocks of purchases.
The report showed that price pressures intensified in July. Input price inflation accelerated for the third month running to the highest since January, widely linked to higher wages and fuel.
Manufacturers also highlighted increased steel prices, as well as supply shortages emanating from China which drove up prices.
The services PMI ticked down to a two month low of 54.4 from 54.5 a month earlier, against expectations for 54.6.
The composite output index, which measures the combined output of both the manufacturing and service sectors rose to a five month high of 55.2 from 54.8. Economists had expected the composite index to tick down to 54.7.
The report pointed to a sustained strong pace of hiring across the private sector, with the rate of job creation unchanged from June’s five-month high.
Despite the sharper rate of growth in output in July, business confidence towards the year-ahead outlook for activity remained relatively subdued.
“Private sector output growth in Germany continued to regain momentum in July, having previously sank to a 20-month low in May. The manufacturing sector was the source of stronger growth in the latest month, after services had driven the expansion in June," said Trevor Balchin, economics director at survey compiler Markit.
“The latest survey also signalled greater inflationary pressures in July, with both input and output prices rising more steeply. Manufacturers widely reported higher steel prices, and supply shortages from China in general. Meanwhile, service providers hiked their own charges at the second-fastest rate on record.”