German private sector growth slows to 3-month low, PMI shows

By Maria Martinez

BERLIN, March 24 (Reuters) - Germany's private sector growth slowed to its weakest pace in three months in March as services lost momentum and costs surged amid the conflict in the Middle East.

The Flash Germany Composite PMI, a preliminary estimate, fell to 51.9 in March from 53.2 in February, a survey by S&P Global showed. Economists polled by Reuters expected a reading of 52.0.

The 50 mark separates growth from contraction.

"March's flash data show the first impacts of the war in the Middle East on growth, demand, business confidence and, perhaps most notably, prices," said Phil Smith at S&P Global Market Intelligence.

Services activity slowed to a seven-month low of 51.2, while the manufacturing PMI climbed to 51.7, a 45-month high.

Manufacturers posted a third straight monthly rise in new orders, with growth the fastest in four years.

Reports from goods producers indicate that demand has in some cases been boosted by companies reacting to the disruption and uncertainty brought on by the war in the Middle East, with some bringing forward purchases over concerns about potential supply disruption in the coming months, Smith said.

"Output expectations have been revised down, which is a sign that the surge in factory activity will likely be short-lived," he added.

Input price inflation across the private sector surged to its highest in more than three years. Manufacturing input costs rose at the fastest rate since October 2022, while factory gate price inflation hit a more than three-year high.

Employment fell again across both sectors, although the overall pace of job losses eased to a three-month low.

Business expectations for the year ahead dropped to an 11-month low but remained in positive territory, the survey showed. (Reporting by Maria Martinez)