Germany's services sector shows modest growth in July, PMI shows

BERLIN (Reuters) -Germany's services sector began the second half of the year with renewed growth in business activity and an increase in demand, a survey showed on Tuesday.

The HCOB final services Purchasing Managers' Index (PMI) rose to 50.6 in July from 49.7 in June, slightly above a preliminary reading of 50.1.

July marked the first time in four months that the reading was above the 50 mark indicating expansion, although the growth rate was marginal and slower than the long-run series average.

A reading below 50 signals contraction.

The survey highlighted a boost in activity driven by expanded workforces, new service offerings and a rise in new business, with inflows of new work increasing for the first time in almost a year - albeit only marginally.

Despite the positive growth, the sector faced challenges with a decrease in backlogs of work, marking a 15-month sequence of decline. Staffing capacity increased but employment growth was at its weakest since the start of the year.

The HCOB final composite PMI, which tracks the services and manufacturing sectors that together account for more than two-thirds of the euro zone's largest economy, also rose, climbing to 50.6 from 50.4 the month before, above an initial reading of 50.3.

"Slightly rising order intakes and moderately improved export business across manufacturing and services combined paint the picture of an economy that is slowly but visibly emerging from a prolonged period of weakness," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.

The German economy is thus expected to return to modest growth in the third quarter after contracting in the second quarter, said de la Rubia.

(Reporting by Miranda Murray; Editing by Hugh Lawson)