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BERLIN, (Reuters) - Germany's private sector expanded for the 13th straight month in May with services activity at its strongest in nearly three years, a survey showed, suggesting Europe's largest economy is growing solidly.
Markit's final composite Purchasing Managers' Index (PMI), which tracks growth in the manufacturing and services sectors, stood at 55.6 in May, well above the 50 mark that separates growth from contraction.
It was, however, below April's reading of 56.1 and also undershot the flash estimate, which held steady.
Oliver Kolodseike, an economist at Markit, said while the survey provided "encouraging news" about the services sector, a slowdown in manufacturing sector growth had weighed on the overall rate of private sector expansion.
"Nevertheless, the average for the second quarter so far is the strongest since early 2011 and suggests that another quarter of solid GDP (gross domestic product) growth is on the table," he said.
The services sector PMI rose to 56.0 from April's final reading of 54.7, but was slightly below a flash reading for May of 56.4.
Service firms' orders rose more sharply and they worked through backlogs. They hired more staff but margins were squeezed as input prices rose far quicker than output prices.
"The combination of increasing order intakes, rising employment and ongoing spare capacity are supportive of hopes that strong service sector growth can be sustained in the coming months," said Kolodseike.
Business expectations in the sector stood at a five-month low in May but nonetheless remained at a high level.
Reporting by Michelle Martin; Editing by Stephen Brown and Hugh Lawson