Germany’s Private Sector Returns to Growth in April, Boosted by Service Sector Activity

Germany’s Private Sector Shows Signs of Recovery as Service Sector Drives Growth

In a surprising turn of events, Germany’s private sector has bounced back to growth in April, fueled by a strong uptick in activity in the country’s service sector, according to a preliminary survey released on Tuesday.

The HCOB German Flash Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 50.5 this month from 47.7 in March, surpassing expectations and marking the first reading above the 50 mark in 10 months, signaling expansion.

The composite PMI index, which tracks the services and manufacturing sectors that make up more than two-thirds of the German economy, has shown promising signs of recovery.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented on the positive outlook, stating, “Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2% in the second quarter, following an estimated 0.1% growth in the first quarter.”

While the service sector saw a significant boost with a rise to 53.3 from 50.1 in March, the manufacturing sector still remains in contraction. However, the rate of decline in factory production has slowed, and confidence among goods producers has reached its highest level in a year.

The manufacturing PMI index increased to 42.2 from 41.9 in the previous month, although slightly below expectations. Despite this, the survey indicated a slight uptick in price pressures at the beginning of the second quarter, with both input costs and output prices showing a modest increase in line with long-run averages.

Overall, the data suggests that the service sector could play a key role in driving the overall economy forward. With signs of improvement in both sectors, there is cautious optimism for a more robust recovery in the coming months.

The news of Germany’s private sector returning to growth has sparked hope for a stronger economic performance in the second quarter, offering a glimmer of light amid the challenges posed by the ongoing pandemic.

(Reporting by Maria Martinez; editing by Christina Fincher)

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