German output growth accelerates as employment spikes

Frankfurt - German economic activity unexpectedly gathered speed in March, prompting a marked pick-up in job creation and price pressures.

A Purchasing Managers’ Index for manufacturing and services rose to 57 from 56.1 in February, IHS Markit said on Friday. That’s the highest level in almost six years and compares with a median estimate in a Bloomberg survey for a drop to 56.

The Bundesbank has argued that quarterly growth rates posted in the second half of last year - 0.1% and 0.4% - “might have understated the economic trend,” signaling that the pace of expansion may accelerate.

With inflation above 2%, unemployment at record low and strong demand both at home and abroad, calls from the region’s largest economy for a prompt winding down of European Central Bank stimulus are likely to get louder.

“The March flash PMI results rounded off a strong first quarter for the Germany economy,” said Trevor Balchin, senior economist at IHS Markit. “Firms responded to capacity pressures in March, with the rate of job creation in the private sector almost matching the survey record set six years ago. Inflationary pressures continued to build.”

A gauge for manufacturing jumped to 58.3 in March - the highest level in 71 months - from 56.8, while an index of services activity rose to 55.6 from 54.4 in February.

Input prices increased at the fastest rate since April 2011, driven by a stronger dollar and more expensive oil and steel. Firms passed some of those cost increases on to customers by raising output prices, IHS Markit said.

A composite gauge for France rose to 57.6 from 55.9. Economists predict an index for the euro area will fall to 55.8 from 56.

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