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German Private Sector Expands

Fri, Oct 22, 2010

EUR

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By Barbara Zigah
In October, the private sector in Germany grew at a faster pace than forecast, raising hopes of a sustainable recovery.  The manufacturing and servicing sector beat market predictions by rising to 56.0, according to Markit’s Composite PMI index; with each of the sub-components higher than predicted.  Economists had expected the manufacturing sector numbers to come in at 54.6, and the services sector at 54.8; actual numbers were 56.1 and 56.6, comparatively.  Any reading higher than 50 denotes expansion.
Confidence, as well as output, in the industrial sector was also stronger than expected, signs that bode well for this morning’s release of the key IFO survey at 8:00 a.m. (GMT).  According to predictions, the October IFO survey, which is, among others, an indicator of business morale over a 6-month period, is expected to slip to 106.5 from last month’s 106.8.
At a news conference yesterday, German Minister of the Economy, Rainer Bruederle, noted that the pace of the German economic recovery may slow next year to 1.8% from the current government estimate of 3.4%.  Last year, Germany’s economy contracted by 4.7%, hit hard by the global financial crisis, and only a rise in exports and higher domestic demand helped push 2^nd quarter numbers into positive territory, showing a growth rate of 2.2%, which set a new quarterly record for the reunified Germany.
Economists see the positive growth in the German economy as having a positive effect on the Eurozone, as a whole.  Comparatively, Germany’s growth rate is twice as high as any of its Eurozone peers.  In late Thursday trading, the U.S. Dollar was trading lower against the Euro at $1.3919.

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