Germany’s services sector remained in contraction in August, though signs of stabilization emerged as the S&P Global Services Business Activity Index registered 49.7, slightly below July’s four-month high of 49.8 but still just below the 50.0 threshold separating growth from decline.
New business inflows expanded for a second consecutive month, with the pace of growth accelerating. Export demand also improved, marking the first increase in new export business since February and the strongest expansion since May 2023. The rise in new work contributed to the first increase in outstanding business since February, while service providers added staff for the first time this year. Employment growth was the fastest since October 2022 and aligned with the long-term average, ending an eight-month hiring freeze.
Business sentiment remained optimistic for the next 12 months, though confidence eased slightly from July’s five-month high. Optimism was supported by expectations of reduced global tensions. Input price inflation accelerated to the fastest pace in three months, driven by higher fuel costs, wages, and electronic component prices. Output price inflation, while slightly lower than July, remained above its long-term average.
The broader economic picture improved as the S&P Global Germany Composite PMI Output Index rose to 51.8 in August from 51.3 in July, reaching a five-month high. The increase was led by faster growth in the manufacturing sector. Survey respondents cited ongoing challenges, including tight financial conditions, elevated costs, and cautious customer spending.
