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German Services Output Weakens as Factories Sustain Strength

Services activity in Germany slowed more than analysts predicted as manufacturing strengthened further, highlighting the uneven pace of growth in the euro area’s largest economy.

A Purchasing Managers Index for services slipped to 54.8 in June from 56.0 in May, while a factory gauge rose to 52.4 from 52.3, London-based Markit Economics said today. Economists surveyed by Bloomberg News had predicted readings of 55.8 and 52.5, respectively. A measure of French activity in both industries showed contraction for a second month.

While German growth has slowed this quarter after output at the start of the year was buoyed by a mild winter, the Bundesbank said economic prospects remain sound. At the same time, France is highlighting the euro area’s struggle to sustain its recovery. The European Central Bank unveiled unprecedented stimulus this month to rekindle growth and boost inflation.

“The strong performance in Germany’s private-sector economy seen throughout 2014 so far continued at the end of the second quarter,” said Pollyanna De Lima, an economist at Markit. “The economic recovery remained broad-based by sector.”

A composite index for German manufacturing and services growth declined to 54.2 in June from 55.6. While that’s the 14th month above 50, the mark that separates expansion from contraction, it falls short of the 55.5 economists predicted.

Markit will release data for the euro area at 10 a.m. Brussels time. Economists predict the currency bloc’s factory index will remain unchanged at 52.2, with the services gauge rising marginally to 53.3 from 53.2.

To contact the reporters on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net; Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net

To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Jana Randow

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