German private sector activity unexpectedly stabilizes

The HCOB Flash Germany Composite PMI surged to 50.1 in January 2025, the highest level since June 2024, up from 48 in December and surpassing expectations of 48.8.

German private sector activity unexpectedly stabilizes

This indicates that private sector business activity was broadly stable after six months of contraction, as the decline in the manufacturing sector slowed (44.1 vs 42.5) and services grew at a faster pace (52.5 vs 51.2). However, despite the PMI's increase, the German economy showed a lack of dynamism due to weak underlying demand, as evidenced by a continued, though slower, decline in new business.

Backlogged orders support activity

Activity was partially supported by work on backlogged orders, but firms continued to reduce capacity through further job cuts. On the price front, average prices charged increased at the fastest pace in 11 months, driven by sharply rising costs. Looking ahead, businesses expressed more optimism about future activity, with expectations improving in both sectors.