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German business activity returns to growth in April, PMI survey shows

A steel-worker is pictured at a furnace at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony

By Maria Martinez

BERLIN (Reuters) - Germany's private sector unexpectedly returned to growth in April, driven by a solid rise in activity in the country’s service sector, a preliminary survey showed on Tuesday.

The HCOB German Flash Composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 50.5 this month from 47.7 in March. That was above a Reuters poll forecast of 48.5 and the first reading above the 50 mark that indicates expansion in 10 months.

The composite PMI index tracks the services and manufacturing sectors that together account for more than two-thirds of the German economy.

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"Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2% in the second quarter, following an estimated 0.1% growth in the first quarter," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The index for the service sector rose to 53.3 this month from 50.1 in March, also its highest in 10 months and above a forecast of 50.5.

"The service sector may serve as a catalyst for the overall economy," de la Rubia said.

Although manufacturing remained in contraction, the rate of decline in factory production eased and confidence amongst goods producers reached its highest for a year, the survey showed.

The manufacturing PMI index rose to 42.2 from 41.9 in the previous month, although the reading was below the forecast of 42.8 in a Reuters poll.

The survey showed a slight increase in price pressures at the start of the second quarter. Rates of both input cost and output price inflation ticked up, but were broadly in line with their respective long-run averages.

(Reporting by Maria Martinez; editing by Christina Fincher)