April seems to have been another good month for the German economy although an underperforming service sector ensured a slight deceleration in the overall business activity rate. At 56.3, the flash composite output index was down 0.8 points from its final March print and on the soft side of expectations.
The flash manufacturing PMI weighed in at 58.2, just a tick short of its final end of quarter mark, while its services counterpart dropped nearly a full point to 54.7.
Helping to ensure a still generally firm headline outturn was another healthy rise in manufacturing output (59.2) although even here the rate dipped from the previous period (59.9). A similar picture was true of aggregate new business which, despite expanding at a robust pace, eased versus March. Job creation followed suit. Slower growth of backlogs was more noticeable as the first fall in services in three months weighed on a sharp increase in manufacturing. Taken together, the net result was a fall in year ahead output expectations which, while firm enough, touched a 2017 low.
Meantime, input costs continued to build although the rate of inflation actually eased for the first time since August last year. Output price inflation similarly moderated but, equally, remained generally strong.
Despite April's setback, April's flash composite output gauge was still 0.3 points above its first quarter average so second quarter economic growth still looks likely to hold up well. However, the slowdown in services is worth keeping an eye on as more of the same here could undermine what otherwise looks set to be a bullish outlook for 2017.