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German manufacturing decline eases as services grow - flash PMIs

German manufacturing decline eases as services grow - flash PMIs
FILE PHOTO: A steel worker of Germany's industrial conglomerate ThyssenKrupp AG works near a blast furnace at Germany's largest steel factory in Duisburg, Germany, January 28, 2019. REUTERS/Wolfgang Rattay -
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Wolfgang Rattay(Reuters)
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BERLIN, June 21 (Reuters) – Activity in Germany’s services and manufacturing sector edged higher in June, a survey showed on Friday, suggesting that growth in Europe’s biggest economy has stabilised at a moderate pace in the second quarter.

IHS Markit’s flash services Purchasing Managers’ Index (PMI)rose slightly to 55.6, a two-month high, from 55.4 in May. The sector has been helping to support growth in Germany while manufacturing has suffered, partly due to trade disputes and Brexit uncertainty.

The manufacturing PMI for Germany hit a four-month high of 45.4 in June from 44.3 in May, signalling an easing in the decline rather than a return to growth.

With production in the sector falling for the fifth straight month, the index remained below the 50 mark that separates growth from contraction.

That left the composite PMI index measuring activity in the services and manufacturing sectors that together account for over two-thirds of the German economy unchanged at 52.6.

“Service sector growth remains above-trend and although the manufacturing downturn continued into June, there are tentative signs that the worst has passed,” said Trevor Balchin, Economics Director at IHS Markit.

All three PMI readings beat forecasts in a Reuters poll.

Europe’s biggest economy has grown for nine years but is facing turbulence from trade disputes between the United States and China and the European Union.

After a modest expansion of 0.4% in the first quarter of 2019, the German government has slashed its growth forecast for the full year to 0.5%.

The Bundesbank said on Monday it expected economic output to fall slightly in the second quarter.

Markit economist Chris Williamson said he expected a growth rate of between 0.2% and 0.3% in the second quarter, adding that the manufacturing sector had not necessarily bottomed out yet.

“But the service sector is still a key driver of German growth and I think that will continue to be so,” said Williamson.

(Reporting by Madeline Chambers; Editing by Catherine Evans)

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