BERLIN(Reuters) - Growth in Germany's private sector accelerated in May to reach its highest level since January, a survey showed on Friday, suggesting Europe's largest economy will extend its strong start to the year into the second quarter.
Markit's final composite Purchasing Managers' Index (PMI), tracking activity in manufacturing and services that together account for more than two-thirds of the economy, rose to 54.5 from 53.6 in April.
The reading was below a flash estimate of 54.7, but still comfortably above the 50 mark that separates expansion from contraction.
Markit economist Oliver Kolodseike said the results were "good but not spectacular". Survey data for the second quarter so far indicated gross domestic product would grow as much as 0.5 percent in the April-June period, he said.
The German economy grew 0.7 percent in the first quarter, more than doubling its growth rate and cementing its role as the euro zone's growth engine. Soaring private consumption and a construction boom more than offset a dip in foreign trade.
The government expects GDP to expand by 1.7 percent this year, on a par with last year.
The PMI sub-index for services rose to a three-month high of 55.2 in May from 54.5 in April. Services providers continued to hire staff, making the rate of job creation the strongest so far this year.
"It seems as if the German employment machine keeps humming," Kolodseike said. However, the data also gave a few reasons for caution, he said.
New business increased at the slowest pace in 10 months and work outstanding dropped the most in 12 months, he noted.
The sub-index for manufacturing, which was published on Wednesday, showed rising demand at home lifted German factory activity to a four-month high in May.