Germany saw the slowest rise in output for 16 months as service sector activity edges closer to stagnation - Markit

Output growth at German private sector firms slowed further at the end of the third quarter. The Markit Flash Germany Composite Output Index fell from August's 53.3 to 52.7 and therefore signalled the weakest expansion in activity in almost one-and-a-half years. While service providers reported a near-stagnation of output during the month, manufacturers recorded ongoing solid growth.

September data signalled a further rise in new order intakes, which companies generally linked to a combination of better marketing initiatives and strong demand from foreign markets. The rate at which new business increased remained below levels seen during the first half of the year, however. That said, manufacturers signalled the strongest rise in new export orders since the beginning of 2014, with Asia and the US mentioned specifically as sources of growth.

Business outstanding rose only marginally during the month as some companies were able to process backlogs amid subdued new order growth. A decline in work-in-hand at service providers contrasted with a solid increase at manufacturers.

Latest survey results pointed to a further solid rise in private sector employment, with the rate of job creation little-changed from that seen in August. The current period of continuous employment growth now stretches to just under three years. Input costs rose for the fifth consecutive month in September, in part driven by higher wages and increased raw material prices. The rate of cost inflation accelerated since August and was among the strongest recorded for over a year.

Some clients passed higher input costs on to their clients in the form of higher charges. The rate of output price inflation was the most marked since January 2014, with both manufacturers and service providers raising their charges.