German factory growth close to three-year high in October – PMI

File photo of an employee of German car manufacturer Mercedes Benz working on the interior of a GLA model at their production line at the factory in RastattGerman manufacturing growth reached an almost three-year high in October as Asian and U.S. demand rose, a survey showed on Wednesday, suggesting the sector will contribute to an expansion in the fourth quarter.

Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose to 55.0 from 54.3 in September to reach its highest level in 33 months.

That was slightly below a flash reading and well above the 50 line that separates growth from contraction.

“The improvement in the sector was fuelled by a marked increase in new order intakes, which in turn led to a solid expansion in production,” Markit economist Oliver Kolodseike said.

To meet the rising demand, firms increased production and hired staff at a pace not seen since September 2011. About 20 percent of companies said they had made new hires.

The expanding workforce signals that at least the short-term outlook looks bright for German manufacturers.

Kolodseike added: “The combination of a marked accumulation of backlogged work and a further solid decline in finished goods stocks means that companies will have to scale up production in order to satisfy rising demand in coming months.”

The survey was another positive sign after Ifo’s closely watched business climate index showed last week that morale among German executives improved unexpectedly in October.

Europe’s biggest economy grew 0.7 percent in the first quarter and 0.4 percent in the second. Preliminary GDP growth data for the third quarter will be published on Nov. 15.

For the year, economic institutes predict a growth rate of 1.9 percent, mainly driven by soaring private consumption and higher state spending on migrants. That would be the strongest pace of expansion in five years.

via German factory growth close to three-year high in October – PMI | Reuters

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