Germany services PMI returns to growth, challenges persist

The HCOB Germany Services PMI climbed to 51.2 in December 2024, up from 49.3 in November and marginally surpassing preliminary estimates of 51.

Germany services PMI returns to growth, challenges persist

This reading marked a return to growth in the services sector following a brief contraction, though the recovery remains fragile amid persistent challenges. New business inflows declined for the fourth consecutive month, weighed down by customer uncertainty, reduced public sector projects, and weak demand from the manufacturing sector. Despite these headwinds, activity levels were supported by work backlogs. However, employment fell for the sixth month as companies adjusted their workforce to align with subdued demand and rising cost pressures.

Rising costs and modest optimism define German business outlook

Inflationary pressures also intensified, with input costs accelerating at the fastest rate since February, driven by wage increases, while output prices rose to an eight-month high. Business confidence saw a modest improvement, fueled by optimism over potential interest rate cuts and post-election stability. Nevertheless, growth expectations remained subdued compared to historical averages.