German Services Output Expands at Fastest Pace in Three Years

German services activity expanded at the fastest pace in three years and manufacturing accelerated, signaling that the economy is recovering from a slowdown in the second quarter.

A Purchasing Managers Index for services jumped to 56.6 in July from 54.6 in June, London-based Markit Economics said today. Economists surveyed by Bloomberg News predicted a drop to 54.5. A factory gauge rose to 52.9 from 52. A reading above 50 indicates expansion.

While the Bundesbank said this week that Germany’s economy may have stagnated in the second quarter, it reiterated that prospects remain sound and a slowdown was to be expected after mild weather boosted growth at the beginning of the year. Consumer confidence as measured by GfK SE, to be released tomorrow, will remain at the highest level since 2006, according to a separate survey.

The PMI numbers suggest “that growth in the euro zone’s largest economy has re-accelerated, having slowed in the previous two months,” said Oliver Kolodseike, an economist at Markit. “Rising workloads continued to feed through to employment gains, suggesting that companies retain positive expectations for growth in the coming months.”

A composite measure for German manufacturing and services growth showed an increase to 55.9 in July from 54. Markit will release data for the euro area at 10 a.m. Brussels time. Economists predict the currency bloc’s factory index will fall to 51.7 from 51.8, with the composite index unchanged at 52.8.

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