German Services Grew to an 8-month High Inverse to Weak Manufacturing Sector

German services growth reached an 8-month high in September based on the survey on Wednesday which seems to be softening the effects of slower manufacturing growth because of its stronger domestic demand.

The IHS Markit’s final composite Purchasing Managers’ Index (PMI), reflecting the performance of manufacturing and services sectors that represent two-thirds of the economy, dropped to 55.0 from 55.6 in August.

The outcome is still a bit lower than the preliminary estimate in the previous month but it still above the 50 demarcation, separating growth from contraction.

The business activity for the services sector improved to 55.9 in September from 55.0 a month earlier with the employment rate reaching its highest in almost 11 years while services firms continue to be optimistic about future businesses.

In the span of two years, the service sector at a quicker pace compared to the manufacturing sectors which supports a significant shift in the driver of growth in the biggest area of euro, according to IHS Markit economist, Phil Smith.

Growth rate almost expanded by 0.5 percent in the third quarter, he added.

German services were driven by a positive record of employment and increasing real wages, higher job security, and cheaper borrowing costs, boosting domestic demand.