Private Sector Positive Growth Pushes Inflation Higher

The month of August has been overall positive for the service sector in Germany. Higher prices uplifted the overall growth of the private sector, according to the survey on Tuesday, The solid upsurge in Europe signals that this the pace will continue. The final composite of the Markit’s PMI that monitors both the manufacturing and services sector which represent more than two-thirds of the whole economy.

The statistics showed an increase to 55.8 from a ten-month low of 54.7 in July. The reading was above the 50 line that divides growth from the contraction which resulted better than the initial estimate of 55.7 as published last month. The upsurge was driven by the manufacturing sector at a fastest rate since April that lead to a sudden spurt in output with new orders and export businesses.

The business activity was up as it reached a two-month high of 53.5 in August with the entry of more orders in a fast pace. Hiring new employees continued although the job creation has become sluggish in more than a year.

On the other hand, the acceleration has also pushed up inflation which has put more pressure on prices that beset the German service providers. The rate of price inflation rose reaching a five-month high while the fees charged by service providers also increase at a quicker rate since March. Hence, the growth forecast of IHS MArket was set to 2.3 for this year and 2.1 percent for the next year.