German service sector suffers first fall since February

Germany’s private sector faced further decline in November, with services showing particular weakness, adding to the gloomy outlook for Europe’s largest economy.

German service sector suffers first fall since February

The Hamburg Commercial Bank’s flash composite purchasing managers' index (PMI) dropped to 47.3 in November, down from 48.6 in October, according to data released on Friday. The figure, well below the neutral 50 mark, indicates a faster pace of contraction and marks a nine-month low, as noted by survey publisher S&P Global. The composite PMI combines data from manufacturing and services. The services PMI fell into contraction territory for the first time since February, slipping to 49.4 from 51.6 in October. Meanwhile, the manufacturing PMI remained in decline but improved slightly, rising to 43.2 from 43.0—a four-month high. "Persistent weakness in manufacturing was exacerbated by the first contraction in services activity in nine months," S&P Global stated. "Weaker demand for goods and services led to further job losses in November. While business expectations edged up from September’s low, confidence remained muted by historical standards amid ongoing economic and political uncertainty."

Economy slow

The PMI survey is based on responses from 800 companies, with the flash reading reflecting approximately 85% of responses collected between November 12 and 20. Final manufacturing data will be released on December 2, followed by the final composite and services readings on December 4. Earlier on Friday, Destatis reported weaker-than-expected growth for the German economy in the third quarter. GDP grew by just 0.1% quarter-on-quarter in the three months to September 30, narrowly avoiding a summer recession. This was a downward revision from the initially reported 0.2% increase. In the second quarter, the German economy contracted by 0.3% following a 0.2% expansion in the first quarter. Year-on-year, GDP increased by 0.1% in the third quarter, matching second-quarter growth. However, after calendar adjustments, GDP contracted by 0.3% compared to the same period last year. Destatis noted that the third quarter included one additional working day compared to the previous year, partially affecting these figures.