Germany Private Sector Growth Slows to 51.5 PMI in Dec: Services Weaken, Manufacturing Contracts

 Germany's private sector growth decelerated for the second consecutive month in December, as stagnating new business inflows and declining manufacturing output weighed on the economy, a survey showed on Tuesday.

The HCOB preliminary German flash composite Purchasing Managers' Index, compiled by S&P Global, fell to 51.5 in December from 52.4 in November, marking its lowest level in four months.

December marks the seventh month in a row that the composite index, which tracks the services and manufacturing sectors that together account for more than two-thirds of the euro zone's largest economy, was above the 50 mark indicating growth.

Nevertheless, the service sector's expansion eased to its weakest pace since September, with the index at 52.6 from 53.1 in November.

Service providers experienced the weakest rise in new work over the past three months, while manufacturing orders fell at the fastest rate since January, driven by declining export sales.

The manufacturing PMI meanwhile dipped further into contraction territory, falling to 47.7 from 48.2 in the previous month.

"What a mess, one might exclaim in view of the further downturn in the manufacturing sector," said Cyrus de la Rubia, Hamburg Commercial Bank's chief economist.

Business confidence dipped to its lowest in eight months, affected by economic concerns and geopolitical uncertainties.

However, manufacturing sentiment improved to a six-month high, possibly reflecting the fact that the government has launched a number of transport projects, decided on reforms to reduce bureaucracy, and wants to expand defence capabilities, de la Rubia said.

"Only if these measures result in an increase in incoming orders will the industry regain momentum," he added.

Employment in the private sector continued to decline, albeit at a slower pace than in November, as job creation in services picked up and factory staffing levels decreased more slowly.