German Manufacturing Strengthens as Economy Shifts Up a Gear

German manufacturing growth unexpectedly accelerated to the fastest pace in more than a year, pointing to building momentum in the euro-area’s largest economy.

Markit Economics said Friday that its factory Purchasing Managers’ Index advanced to 53.2 in August from 51.8 in July. That’s the highest since April 2014 and above the 50 mark that divides expansion from contraction. It also beat the median estimate of 51.6 in a Bloomberg survey of economists. A services gauge slipped, though a composite measure of both industries rose to a four-month high.

The economy expanded 0.4 percent in the second quarter, and the Bundesbank has said Germany is poised for “solid” expansion that’s supported by external and domestic demand. Markit said the PMI indicate growth this quarter will be similar to the rate in the three months through June.

The economy “shifted into a higher gear in August,” said Oliver Kolodseike, an economist at Markit. “Encouragingly, manufacturers reported accelerated production growth.”

The improvement in Germany is in contrast to France, where the economy stagnated in the second quarter. Markit’s latest numbers show French manufacturing shrank for a second month in August and services growth weakened. That left the composite business index at a four-month low.

European Central Bank policy makers have expressed disappointment about the pace of the euro area’s recovery. Further headwinds include China’s currency devaluation, which has sparked volatility in emerging markets, as well as looming interest-rate increases from the Federal Reserve and Bank of England.

A euro-area manufacturing index probably slipped to 52.2 in August from 52.4 in July, according to the median estimate in a Bloomberg survey. A services gauge probably remained at 54. Markit will publish the reports at 9 a.m. London time.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE