German business activity grows in August, PMI shows

BERLIN, Aug 21 (Reuters) - German business activity expanded modestly in August as an upturn in manufacturing offset a faster decline in services activity, a preliminary business survey showed on Friday.

The S&P Global Flash Composite PMI Index for Germany fell to 51.0 in August from 51.3 in July, but remained above the 50 mark that separates growth from contraction.

Economists polled by Reuters had forecast a reading of 51.3, unchanged from last month. 

The composite index tracks the services and manufacturing sectors that together account for more than two-thirds of the euro zone's largest economy.

MANUFACTURING DRIVES GROWTH

"The recovery in the manufacturing sector has regained momentum, after it showed signs of stalling in the second quarter," said Phil Smith, economics associate director at S&P Global Market Intelligence.

The manufacturing PMI rose to 54.1 from 52.2 in the previous month, the strongest reading in 51 months. 

Services activity weakened further, with the services PMI dropping to 48.5 from 49.8, a three-month low, marking a fifth straight monthly decline and the fastest contraction since May.

"Although the service sector continues to act as a drag on growth, a second successive slight uptick in new business and a renewed rise in employment in the sector suggest that things could start to get better soon on the activity front," Smith said.

Employment was unchanged after 26 straight months of decline, as a modest rise in services staffing coincided with the weakest pace of factory job cuts in more than a year.

Business expectations rose to their highest since just before the outbreak of the U.S.-Israeli war on Iran in February and moved slightly above the long-run average, the survey showed. 

(Reporting by Maria Martinez; Editing by Hugh Lawson)