German private sector growth remains tepid in July, PMI shows

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By Miranda Murray

BERLIN (Reuters) -German business activity continued to grow marginally in July, though at a slightly slower pace than in June, as manufacturing output expanded for a fifth consecutive month and services activity stabilised, a survey showed on Thursday.

The HCOB German flash composite Purchasing Managers’ Index, compiled by S&P Global, fell to 50.3 points in July, down from 50.4 in June and below the 50.7 forecast in a Reuters poll.

The composite index, which tracks the services and manufacturing sectors that together account for more than two-thirds of the euro zone’s largest economy, is now marginally above the 50.0 mark that separates growth from contraction.

The services sector improved to 50.1, up from 49.7 in June, reaching a four-month high and just beating a forecast of 50.0.

Manufacturing remained mired in a downturn at 49.2, below the growth threshold but was up from 49.0 last month and only slightly short of the forecast for 49.5.

“The economic situation in the manufacturing sector remains fragile, as underscored by the headline PMI remaining below the 50 mark,” said Hamburg Commercial Bank chief economist Cyrus de la Rubia.

“However, the fact that production in this sector has now expanded for five months in a row is encouraging,” he added, saying there were increasing signs of a recovery in the sector.

In addition, the service sector is no longer acting as a drag on the economy, he said, and after 10 months of decline, July marked the first rise in new business in nearly a year.

“The brightening outlook is in line with our expectation that rising real wages and expansionary fiscal policy should help the sector as a whole to regain its footing,” he added.

(Reporting by Miranda Murray; Editing by Joe Bavier)