German Manufacturing Unexpectedly Expands as Services Accelerate

German manufacturing unexpectedly expanded in July and services growth accelerated, signaling that the recovery in Europe’s largest economy is building momentum.

A manufacturing index based on a survey of purchasing managers rose to 50.3 from 48.6 in June, London-based Markit Economics said today. Economists in a Bloomberg survey predicted 49.2. A similar gauge for services rose to 52.5 from 50.4, compared with the median estimate of economists of 50.7. A reading of 50 is the dividing line between expansion and contraction.

The euro rose against the dollar after the report was published and was trading at $1.3250 as of 8:37 a.m. London time, up 0.2 percent from yesterday.

The Ifo institute’s index of German business confidence increased for a second month in June and unemployment unexpectedly declined. Factory orders, industrial production and exports slumped in May as overseas sales were curbed amid the 17-nation euro region’s struggle to emerge from recession and slower growth in China, Germany’s third-biggest export destination.

The Bundesbank said on July 22 that after a strong second quarter, helped by a rebound in industry and construction, signs of a slowdown in economic output are now appearing.

Separately today, an index of French manufacturing rose to 49.8 from 48.4, while a services gauge jumped to 48.3 from 47.2. Both measures exceeded economists’ estimates.

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