Germany's Manufacturing Sector Fuels Modest Economic Growth in August

Overview of Economic Growth

(Reuters) -Germany's private sector economy saw a slight uptick in growth in August, driven primarily by the manufacturing sector which experienced a rise in new orders, according to a survey on Thursday.

Manufacturing Sector Performance

The HCOB Flash Germany Composite Purchasing Managers Index, compiled by S&P Global, rose to 50.9 in August from 50.6 in July, marking a five-month high and beating a Reuters poll forecast of 50.2. A PMI reading above 50 indicates growth in activity.

Employment Trends

Manufacturing led the expansion, with its output index climbing to 52.6 from 50.6 in July, reaching a 41-month high. This growth was supported by a solid increase in new orders, the fastest since March 2022, despite a slight decrease in export sales. In contrast, the services sector saw its business activity index fall to 50.1 from 50.6, a two-month low, indicating near-stagnant growth.

Cost and Price Indexes

Employment across Germany continued to decline, with job cuts in manufacturing outpacing a slight increase in hiring within the services sector. This marks a continuation of the downward trend in employment since June last year.

The input cost and output price indexes both experienced upticks, reversing the declines seen in July. The rise in input prices was particularly driven by the services sector, likely due to increasing wages.

"Germany’s economy has been growing throughout the summer so far, and the pace of expansion has even picked up slightly," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"While we're talking about modest gains here, this trend signals resilience - considering the headwinds like U.S. tariffs, geopolitical uncertainty, and relatively high long-term interest rates."

(Editing by Toby Chopra)