Germany's private sector expanded for the eighth month running in December although growth among services providers eased slightly from a two and a half year year peak in November.

That is according to a survey of service providers and manufacturing firms carried out by Markit.

The final composite Purchasing Managers' Index stood at 55 in December, comfortably above the 50 mark that separates growth from contraction.

The expansion was slightly weaker than the flash estimate of 55.2 and November's final reading of 55.4.

New employment increased for the sixth month in a row and backlogs of work grew at a faster pace than in November, suggesting companies may have to step up production.

Meanwhile, German annual inflation accelerated in line with expectations by 0.1 percentage points to 1.4% in December but remained below the European Central Bank's euro zone target of close to but just below 2%, preliminary data showed.

Consumer prices rose just 1.5% for the full-year 2013 after a gain of 2% in 2012 and 2.1% in 2011, the Statistics Office said today.

The Office said cheaper oil in the light of the weaker world economy had driven the deceleration in 2013 inflation.

Economists and the government expect inflation in Germany to rise this year. Berlin said in October it saw consumer prices rising 1.8% in 2014.

Consumer prices harmonised to compare with other European Union countries rose 0.5% on the month in December and showed a year-on-year gain of 1.2%. Harmonised consumer prices rose 1.6% on the year in 2013, after increasing 2.1% in 2012.

Final German inflation data for December are due to be released on January 16, the office said.

Further good news from Spain

Spain's service sector registered its fastest pace of growth in six and a half years in December, fuelling optimism the economy could expand more than expected in 2014.

Markit's Purchasing Managers' Index of service companies stood at 54.2 in December, up from 51.5 in November, and marking the second straight month in which the index was above the 50 line separating growth from contraction.

The service sector, which accounts for around half of Spain's economic output, was hit hard as Spaniards reined in spending during a five-year economic slump that has left more than one in four of the workforce out of a job.

After a decade-long property bubble burst in 2008, Spanish companies have been fighting to survive a dire domestic economy and increasingly competitive export market by slashing prices, wages and their workforces.

Registered jobless data from the Spanish Labour Ministry on Friday also suggested the worst may be over, marking the second largest drop since records began in the number of people signing on as out of work.

Positive outlook for France despite fall

French services companies saw business fall back in December at its fastest pace in six months, but their outlook for the months ahead brightened.

Markit said its purchasing managers index for services fell last month to 47.8 from 48 in November, slightly better than a preliminary reading of 47.4.

Falling to its lowest point since last June, the index dropped further away from the 50-point threshold dividing an expansion in activity from a contraction.

Markit's overall PMI index, which includes the services and manufacturing sectors, fell to 47.3 from 48 in November.

The service sector was hit by a fall in the flow of new work and firms responded to the slack in business conditions by cutting staff for the second month in a row, albeit by less than in November.