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German private sector expands at slower pace in October: PMI

An aluminium wheel is pictured at the stand of German car manufacturer VW at the Frankfurt Motor Show (IAA) September 14, 2013. REUTERS/Ralp
An aluminium wheel is pictured at the stand of German car manufacturer VW at the Frankfurt Motor Show (IAA) September 14, 2013. REUTERS/Ralp

BERLIN (Reuters) - Germany's private sector grew at the slowest pace in three months in October, a survey showed on Thursday, in a sign that Europe's largest economy is expanding, but only moderately.

Markit's preliminary composite Purchasing Managers' Index (PMI), which tracks growth in both the manufacturing and services sector and covers more than two-thirds of the economy, slipped to 52.6 in October from 53.2 the previous month.

The reading was above the 50 mark that separates growth from contraction for a sixth straight month, but marked the lowest level since July as the services sector performed less well than expected.

"Germany's private sector started the final quarter of 2013 in a positive fashion," said Tim Moore, an economist at Markit. "A slower rate of expansion in services activity meant that overall growth eased slightly from the trend recorded over the third quarter."

After suffering a subdued start to 2013, the German economy expanded 0.7 percent in the April to June quarter thanks mainly to domestic demand. Economists expect it to have grown at a slower pace in the third quarter.

"We are looking at 0.4 percent in the third quarter, possibly 0.3 in the fourth," said Markit chief economist Chris Williamson.

The index tracking the services sector dropped to 52.3 from 53.7 in September, missing the consensus forecast in a Reuters poll of 25 economists for a rise to 53.9 as firms cut jobs and growth in new business slowed.

Williamson said this disappointing figure suggested that the domestic economy was not performing that strongly due to cautiousness among consumers, although it is still expected to drive overall growth this year, helped by a strong labor market, solid wage hikes and favorable financing conditions.

But stronger growth in the manufacturing sector was encouraging, said Williamson. The index tracking the manufacturing sector was in expansion territory for the fourth consecutive month, rising in line with expectations to 51.5 from 51.1 in September.

New orders in the manufacturing sector continued to grow although contracts from abroad expanded at a more subdued pace. Earlier this month, Germany's trade association slashed its forecast for full-year export growth to less than 1 percent from a previous estimate of 3 percent.

(Reporting By Sarah Marsh; Editing by Hugh Lawson)

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