German economy loses steam as services stall

Germany’s economy lost momentum at the end of the third quarter as near-stagnation in the services sector offset an improvement in manufacturing. IHS Markit’s composite Purchasing Managers Index dropped to 52.7, a 16-month low, from 53.3 in August, according to a report published yesterday. The services reading was 50.6, just above the 50 mark that divides expansion from contraction.

Markit said it’s not clear if the slowdown will be temporary, though it noted that new business remains weaker than earlier in the year. Economists surveyed by Bloomberg expect expansion of 0.3 per cent this quarter and next after 0.4 per cent in the three months through June.

“A big concern is the divergent trends within the economy, with service provides struggling to eke out any meaningful growth,” said Oliver Kolodseike, an economist at Markit. “Weak demand continued to curb inflows of new business and companies reported a lack of work outstanding, boding ill for output growth in coming months.”

Germany’s factory index rose to 54.3 in September, a three-month high. In France, the composite PMI climbed to 53.3 from 51.9 in August, Markit said earlier, with the measures for both manufacturing and services improving.

In the euro area, the PMI probably came in at 52.8 this month, little changed from the 52.9 in August, according to a survey. Markit will publish those numbers at 9am London time. cent in the first quarter. The Eurozone economy has been bumping along for years in a subdued recovery from the 2008 global crash and ensuing debt crisis.

Austerity

Governments adopted tough austerity policies to ease debt but that dampened growth, prompting the European Central Bank to step into the breach with massive stimulus programmes. The results so far have been disappointing, with the ECB under pressure to do more.