Manufacturing fuels rise in German business activity - PMI
German business activity increased in September driven by rising manufacturing production but growth slowed as activity weakened in the services sector.
The IHS Markit purchasing managers' index's preliminary reading was 53.7, down from 54.4 in August. The September result was broadly in line with a market forecast of 54 - with 50 marking the difference between expansion and contraction.
Manufacturing output hit a 32-month high of 62.2, up from 57.7 a month earlier, as factories made up ground lost during the Covid-19 lockdown. Services growth slowed to a three-month low of 49.1 compared with 52.5 in August.
Factories increased production as new work rose at the fastest pace for more than a decade and export orders increased sharply. Service companies' new business growth weakened with international demand subdued.
Phil Smith, associate director at IHS Markit, said rising Covid-19 case numbers had coincided with declining confidence among service providers.
"The recovery in the tertiary sector has possibly reached a ceiling thanks to ongoing social restrictions and still-high levels of uncertainty in the economy, including around job security. In contrast, manufacturing is still rebounding strongly thanks in part to improving export demand."
Overall, German businesses were more optimistic about the outlook. This helped slow the decline in employment seen since the start of the Covid-19 crisis. Most job losses were in manufacturing but the pace of redundancies slowed markedly from August.
The figures show a reversal of pre-pandemic trends when Germany's economy was supported by strong services activity as its manufacturers came under pressure from US-China trade tensions, problems for its car industry and a slowdown in China.
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "Judging by these data, the German economy is now bifurcated in exactly the opposite way it was before the virus. Sentiment for the next 12 months improved again, driven primarily by firming confidence in manufacturing."