Business activity in Germany's private sector rose at its fastest rate in ten months in March, marking the first increase in manufacturing production in nearly two years, according to a recent survey.
The HCOB German flash composite Purchasing Managers' Index, compiled by S&P Global, increased to 50.9 in March from 50.4 in February, its highest level since May of the previous year and above the 50.0 threshold that indicates growth. Analysts had anticipated a reading of 51.0.
"Economic growth in the first quarter looks promising, with the composite PMI staying above the expansionary threshold every month," noted Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Furthermore, Germany is preparing a substantial spending initiative aimed at revitalizing growth in Europe’s largest economy and enhancing military capabilities. This fiscal package could signal the start of a more sustained recovery, according to de la Rubia.
While still in contraction territory, the manufacturing index improved to 48.3 from 46.5, surpassing expectations of a rise to 47.0 due to stronger demand. "Manufacturers have ramped up production for the first time in nearly two years," de la Rubia attributed this increase to an import boom from the U.S. and expected gains from Germany's new infrastructure and defence package.
The services sector experienced a decline in momentum, with the business activity index dropping to 50.2 from 51.1, falling short of the forecast of 51.6 yet remaining in growth territory.
Additionally, inflationary pressures eased, with input costs and output prices rising at their slowest rate since last October, according to the survey.