German Economy Regains Momentum as Manufacturing Powers Growth

(Bloomberg) -- Germany's economy recovered momentum at the start of the fourth quarter as factory activity expanded at the fastest pace in almost three years.

A Purchasing Managers' Index for manufacturing and services rose to 55.1 in October from 52.8 a month earlier, IHS Markit said on Monday. That's the highest level in three months and above the 50 mark that divides expansion from contraction.

The gauge adds to evidence that Europe's largest economy has overcome a summer soft patch, with the latest reports showing factory orders up the most in five months and business sentiment at the highest in more than two years. An improving outlook has raised concern among the German public that inflation, too, could accelerate, kicking off a debate about negative real interest rates for savers.

“The German economy has entered the fast lane again,” said Oliver Kolodseike, an economist at IHS Markit. “On the price front, there are some clear signs that inflationary pressures are picking up, which should provide welcome news for policy makers in Frankfurt.”

European Central Bank President Mario Draghi has held out the prospect of more stimulus in December to help raise inflation in the 19-nation euro area closer toward 2 percent. On Thursday, he said price growth in the region lacked convincing upward pressure.

Germany's manufacturing PMI rose to 55.1 in October from

54.3, the strongest level since January 2014, while a gauge for services rose to the highest since July.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow, Jeff Black