German business activity contracts at slower pace in October, PMI shows

BERLIN (Reuters) - German business activity contracted in October but less steeply than the previous month, according to a survey published on Thursday.

The HCOB German flash composite Purchasing Managers' Index, compiled by S&P Global, rose to 48.4 from 47.5 in September, beating analysts' forecasts for a reading of 47.6. Any reading below 50 indicates contraction.

"The start to the fourth quarter is better than expected," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Growth in the fourth quarter is a possibility, he added, but GDP may stay flat for the full year, underscoring the challenges of high energy costs, competition from China and labour market shortages which have hit manufacturing hard.

Germany's economy contracted by 0.1% in the second quarter and the government expects output to contract by 0.2% for 2024 as a whole. Gross domestic product data for the third quarter is due next week.

Business activity in Germany's services sector improved unexpectedly in October, with the index rising to 51.4 from 50.6 in September. Analysts polled by Reuters had expected the figure to remain flat.

Manufacturing posted a stronger-than-forecast reading but not enough to shake off its years-long downturn: the index climbed to 42.6 from 40.6 the previous month, higher than a consensus estimate of 40.8.

(Reporting by Rachel More; Editing by Christina Fincher)

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