By Miranda Murray
BERLIN, Jan 6 (Reuters) - Germany's service sector continued to grow at a solid pace in December, although the rate of expansion eased for the second consecutive month due mainly to a slower
increase in new business, a survey showed on Tuesday.
The final HCOB Germany services PMI fell to a three-month low of 52.7 in December from 53.1 the month before, coming in just above December's preliminary reading of 52.6 and still well clear of the 50.0 mark that divides growth from contraction.
Growth in new business slowed despite a modest rise in international sales driven by stronger demand from Asia.
"The moderate growth in new business suggests that the start to the new year could be satisfactory," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.
Employment in the services sector rose modestly for the third month in a row, with firms reducing backlogs of work at the fastest rate since last September.
The survey indicated faster increases in both input costs and output charges. Wages remained a key driver of rising costs, and companies were able to pass on some of these costs to customers.
COST CONUNDRUM 'UNLIKELY TO DISAPPEAR'
"This cost problem is unlikely to disappear in the coming year, as the main cause is demographic change and the resulting labour shortage, which continues to prevail in many sectors despite the generally weak economy," said de la Rubia.
Business expectations dropped to their lowest level since last April, reflecting concerns over the competitiveness of German industry, the geopolitical situation and policy changes.
The slowdown in services was also reflected in the HCOB final composite PMI that tracks services as well as manufacturing, which eased to a slightly downwardly revised 51.3 in December from November's 52.4.
(Reporting by Miranda Murray; Editing by Hugh Lawson)
