German Economy Starts Quarter Weaker as Orders Slow

A gauge of German economic growth weakened in April as new business slowed.

A Purchasing Managers Index for factories and services fell to 54.2 from 55.4 in March, London-based Markit Economics said on Thursday. While the reading remains well above the 50-point mark that divides expansion from contraction, it is below the 55.6 predicted by economists in a Bloomberg survey.

“Survey data are consistent with further economic growth at the start of the second quarter,” said Oliver Kolodseike, an economist at Markit. “It will be interesting to see whether weaker new-order growth and increased prices will result in a further slowdown of output expansion or whether the German economy will regain momentum in coming months.”

The Bundesbank sees “quite robust” economic growth this year. The country’s government is optimistic, too, raising its outlook on Wednesday as it pointed to rising wages and record-low unemployment. At the same time, investors lost some of their confidence in Germany’s performance as global economic weakness damped export prospects.

A gauge of German services activity dropped to 54.4 from 55.4 in March while a similar index for the manufacturing industry fell to 51.9 from 52.8. In a sign that deflation risks are abating, companies raised output costs for a third month, Markit said.

The country’s economy will expand 1.8 percent this year and in 2016, the Economy Ministry predicts. Business confidence as measured by the Ifo research institute is forecast to rise for a sixth month to the highest level since June.

A measure of manufacturing and services activity in the euro area will probably signal accelerating growth, according to a separate survey. The report is due at 10 a.m. Frankfurt time. A French PMI unexpectedly dropped to 50.2 from 51.5 in March.

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