German services lose momentum as catch-up effects wane, supply shortages spill over -PMI

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BERLIN, Oct 5 (Businesshala) – Germany’s service sector activity continued to grow strongly in September, but the recovery from the COVID-19 pandemic seems to have lost momentum as the catch-up effects are easing and more companies hit by supply constraints, Shown in a poll Tuesday.

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IHS Markit’s final Purchasing Managers’ Index (PMI) for the services sector fell to 56.2 from 60.8 in August, still well above the 50 range that separates growth from contraction and slightly better than a flash reading of 56.0.

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IHS Markit economist Phil Smith said the survey shows Germany is heading for a more moderate period of economic growth in the last months of the year.

“Our current forecasts are for 3.0% quarter-on-quarter growth in GDP in Q3, followed by 1.2% growth in Q4,” Smith said.

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The German economy shrank 2.0% quarter-on-quarter in the first three months of the year and then expanded by 1.6% quarter-on-quarter in the three months from April to June.

The overall PMI index, which includes both the services and manufacturing sectors, declined to 55.5 from 60.0 in August, reflecting the continued recovery of the manufacturing sector. The reading was better than the flash figure of 55.3.

“The loss of momentum is partly natural as activity moves closer to pre-pandemic levels,” Smith said, adding that the drag on growth was also becoming more noticeable from a lack of materials, allowing service firms to was directly affecting and also through the slowdown in manufacturing.

Smith said the risk of further spillover effects in other parts of the economy, along with inflationary pressures, is undermining service providers’ growth expectations.

Reporting by Michael Nienaber, Editing by Katherine Evans

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