By Christiaan Hetzner
BERLIN, May 4 (Reuters) - Germany's services sector grew in April at its slowest pace in half a year as burgeoning costs of energy and wages weighed more heavily on sentiment, final data from market research group Markit showed on Wednesday.
The seasonally adjusted services activity index dropped to 56.8 for last month, lower than the previous flash estimate, and a decline from the 60.1 recorded in March.
"Business sentiment is at a six-month low as firms predict the rate of input price inflation to remain marked over the coming months," Markit said in a statement.
"Fuel and staff wages were particularly highlighted by panelists."
Markit's services activity index is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago, with a reading of 50 marking the threshold between contraction and expansion.
Markit's services survey comprises six sectors mainly focused on telecommunications, IT, transport, finance and leisure, while excluding goods retailers and wholesalers.
A separate index of order intake volumes showed the fastest growth since January, attributed to strong confidence that new business would continue to increase over the next 12 months.
The sub-index for business expectations in the services sector, which is more reflective of sentiment going forward, lost some momentum however on fears that rising costs would likely lead to tighter monetary policy.
COSTS PASSED ON
Should Markit's anecdotal evidence of notably higher staff pay be confirmed in subsequent hard data, the European Central Bank will come under increasing pressure to hike benchmark euro zone lending rates to stave off risks of a wage-price spiral.
Investors are already pricing in a near 100 percent chance
that the ECB will have lifted its main refinancing rate a
further 25 basis points to 1.50 percent by August.
The rate of input price inflation in the services sector may have dropped from the near three-year highs of 62.7 seen in March, but even this moderate easing to 60.3 brought it nowhere near levels consistent with price stability.
Whereas job creation continued for the 15th month in a row and new business grew for the 10th consecutive month, input prices notched up increases for the 19th month running.
Fierce competition may have diminished pricing power for services firms, but companies especially in banking and finance attempted nevertheless to pass costs on to customers, with all six sub-sectors showing a net increase in prices charged in April.
Markit's composite output index -- a current snapshot of private sector health that combines services activity with manufacturing output -- edged lower to a final reading of 59.2 last month from 60.4 in March. (Reporting by Christiaan Hetzner; editing by Stephen Nisbet)