Easing of supply shortages sustains German manufacturing recovery - PMI - Reuters

The skyline with its financial district is photographed during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach/File Photo

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BERLIN, Jan 24 (Reuters) - Strong factory output growth helped by easing supply bottlenecks pushed activity in Germany's manufacturing sector to a five-month high in January, a survey showed on Monday.

IHS Markit's flash Purchasing Managers' Index (PMI) showed that activity in the manufacturing sector rose to 60.5 from 57.4 in December.

Activity in the services sector rose to a two-month high of 52.2 after shrinking in December, confounding a forecast that had pointed to a decline and pointing to a positive mood among consumers and business despite the impact of the Omicron coronavirus variant.

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As a result, the flash composite PMI, which tracks the manufacturing and services sectors that together account for more than two-thirds of the German economy, rose to a four-month high reading of 54.3 from 49.9 the previous month.

The results showcased the resilience of the German economy whose recovery from the pandemic was held back last year by supply shortages and fears that the Omicron variant could result in crippling lockdowns.

"Manufacturing is expected to stage a recovery in 2022 as supply bottlenecks ease, but seeing growth of this speed already is a welcome development," said Phil Smith, Economics Associate Director at IHS Markit.

"All in all, the data mark a positive start to the year and go some way to allaying fears about Omicron's impact on the German economy in the first quarter," he added. "Still, rising costs remain a concern for businesses, with the survey data showing that input prices are continuing to rise sharply and on multiple fronts."