Germany's services and manufacturing sectors both gave signs of slowing growth in June, a survey showed today, suggesting the recovery in Europe's largest economy will fade in the second half of 2010.
A flash estimate of the Markit purchasing managers' index (PMI) for the manufacturing sector eased to 58.1 from 58.4 in May, just surpassing expectations for 58.0 and remaining above the key 50 level separating contraction from growth.
The flash services sector headline PMI index slipped to 54.6 from 54.8.
"Growth probably peaked back in April. We're seeing already very clear signs of a weakening outlook," said Chris Williamson, chief economist at data compiler Markit.
He pointed to a dip in a services sector new business index to 50.5 from 51.6 in May, adding: "That's barely expanding."
"That's just highlighting the weakness of domestic demand in Germany," he added. "There are already signs that the global trade cycle in goods has peaked and growth is weakening there.
"If Germany succumbs to that slower growth of demand for its export goods and domestic spending remains subdued, growth is almost inevitably going to slow and we've got austerity measures as well. So the second quarter very much represents the peak," Mr Williamson said.
In the manufacturing sector, a new orders index slipped to 57.6 from 59.6 in May.
The weaker outlook matched the forward-looking component of the Ifo economic institute's German business sentiment survey, released yesterday, which pointed to a slowdown in Germany later this year as the government withdraws economic stimulus.
Despite the weakening in both the sectoral PMIs, a composite index combining data from the two surveys edged up to 56.6 from 56.4. The composite index uses the manufacturing output index, which rose to 60.4 in June from 59.2, and the headline services activity index.
Germany emerged from its deepest post-war recession in the second quarter of last year but the recovery slowed over the winter when severe weather disrupted business activity.
Recent economic indicators have, however, beaten forecasts and pointed to a renewed pick-up. Finance minister Wolfgang Schaeuble said this week that growth this year might get closer to 2 per cent than the government had hoped a few weeks ago.
The government's official forecast is for growth of 1.4 per cent in 2010.
Reuters