German private sector companies reported solid activity growth at the start of the second quarter. The Markit Flash Germany Composite Output Index rose from 54.3 in March to 56.3.
The latest reading was the second-highest in nearly three years and stretched the current period of growth to 12 months. Survey participants commented that an improved economic environment and increased order intakes were the main contributors to the latest expansion.
The acceleration in output growth was broad-based by sector with both manufacturers and service providers signalling sharper expansions. Goods producers reported the quickest rise in output for three months (and the second sharpest since mid-2010), while growth in the service sector reached a two-month high.
Growth in new business also picked up in April to an above average pace amid reports of increased domestic and foreign demand plus a general improvement in economic conditions. Despite easing to a five-month low, new work placed at goods producers increased at a marked pace and service providers reported the fastest rise in order intakes since November last year.
In the goods producing sector, new export work continued to increase, with companies mentioning Asia, Europe and the US as sources of growth. The net rise was slightly sharper than in March. Increased business requirements were one of the main reasons encouraging German private sector companies to hire additional workers during April.
The rate of job creation accelerated since the previous month and was down only marginally from February's 25-month high. Concurrently, backlogs of work were broadly unchanged, having fallen in March.
Input costs were unchanged in April, ending a nine-month period of rising prices. Cost inflation at service providers eased to a 44-month low, while manufacturers signalled the sharpest drop in input prices since July last year, commenting on successful price negotiations, lower raw material prices and increased competition among suppliers. Meanwhile, companies lowered their output charges fractionally.
With output and new orders rising, German manufacturers increased their purchasing activity further, albeit to the weakest extent since last October. Increased demand also led to a reduction in stocks of finished goods. The fall in inventories was the most marked in just over a year.
Oliver Kolodseike, economist at Markit and author of the Flash Germany PMI, said, "April's flash PMI results signalled a continuation of the strong recovery in Germany's private sector, suggesting that the economy is set to build on the foundation of last quarter’s solid growth.
"A combination of increased activity, rising new orders and further employment growth across both the manufacturing and service sectors suggest companies will remain in expansion mode during the coming months."
"Price data meanwhile point to an increasing risk of deflationary pressures in the eurozone's largest economy, with some companies commenting that successful price negotiations, increased competition among suppliers and lower raw material prices had pushed input costs down. Official data showed that inflation in Germany fell to 1% in March, the lowest level since mid-2010."
"Meanwhile, business expectations at service providers remained high. Anecdotal evidence suggested that optimism was linked to improved consumer confidence, increased domestic and foreign demand and the ongoing economic recovery."
