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German economy witnessed an unexpected upturn in the month of July, the latest manufacturing activity report from IHS/Markit research showed.

German manufacturing purchasing managers index (PMI) rebounded in July, coming in at 57.3 while services PMI eased slightly to 54.4 versus 54.5 last.

The IHS Markit Flash Germany Composite Output Index hit a five-month high at 55.2 in July, from June’s 54.8.

Key comments from  Trevor Balchin, Economics Director at IHS Markit:

“Private sector output growth in Germany continued to regain momentum in July, having previously sank to a 20-month low in May. The manufacturing sector was the source of stronger growth in the latest month, after services had driven the expansion in June. “Private sector employment continued to expand at a historically sharp rate in July, with the pace unchanged from June’s five-month high. Manufacturers added staff at a faster pace than service providers for the seventeenth consecutive month.”

“Data on new business were less positive than the trends for total activity and jobs, however. This mainly reflected new orders in manufacturing not rising as fast as output, resulting in the slowest rise in backlogs in the sector for two years.”

“The latest survey also signalled greater inflationary pressures in July, with both input and output prices rising more steeply. Manufacturers widely reported higher steel prices, and supply shortages from China in general. Meanwhile, service providers hiked their own charges at the second-fastest rate on record.”