Germany’s private sector experienced notable growth in March, marking the highest increase in business activity in ten months. This upturn is attributed to a rise in manufacturing production, which had not occurred in nearly two years, according to a survey released on Monday.
The HCOB German flash composite Purchasing Managers’ Index (PMI) showed an increase to 50.9 in March, up from 50.4 in February. This figure is the highest recorded since May of the previous year and sits above the critical threshold of 50.0 which indicates growth rather than contraction.
Analysts had predicted a slightly higher reading of 51.0. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented on the promising signs for economic growth in the first quarter.
The composite PMI has consistently remained above the expansion threshold throughout this period. Furthermore, Germany’s recent approval of a significant spending initiative aims to stimulate growth within Europe’s largest economy while enhancing military capabilities.
De la Rubia indicated that this fiscal stimulus could signal the start of a more sustained economic recovery. While the manufacturing index still shows signs of contraction, it improved to 48.3 from 46.5, surpassing expectations of a rise to 47.0, due to increased demand.
De la Rubia noted that manufacturers have finally increased production, thanks to an influx of imports from the U.S. and anticipated advantages from new infrastructure and defense initiatives. In contrast, the services sector displayed a slowdown in momentum, with its business activity index dipping to 50.2 from 51.1, falling short of the 51.6 forecast.
Despite this, it remains in growth territory. Additionally, inflationary pressures have lessened, with the survey indicating that input costs and output prices are rising at their slowest rate since October of the previous year.