The HCOB Flash Germany Composite PMI increased to 50.9 in March 2025 from 50.4 in February, marking the strongest expansion in private sector activity in ten months.
Germany composite PMI at 10-month high
However, the reading came in slightly below market forecasts of 51, highlighting that while the economy is showing signs of improvement, challenges remain.
The overall increase was largely driven by the manufacturing sector, which posted its first rise in production in nearly two years. Factory output growth was supported by improved supply conditions and stabilizing demand, offering a glimmer of hope for the struggling industrial sector. However, the services sector saw its growth nearly stall, weighed down by a continued lack of new business, suggesting that domestic demand remains fragile.
Employment continued to decline
Employment levels continued to decline, reflecting persistent low capacity utilization, although the pace of job cuts slowed compared to previous months. Many businesses remained cautious about expanding their workforce amid uncertain economic conditions.
On the inflation front, price pressures eased, with both input cost and output price inflation falling to their lowest levels since last October. Lower raw material and energy costs contributed to the decline, providing some relief to businesses and consumers alike.
Business sentiment improved slightly
Finally, business sentiment toward future activity improved slightly, indicating a cautious optimism among firms as they anticipate a gradual recovery. However, uncertainty surrounding geopolitical risks, global trade policies, and the broader European economic outlook continues to weigh on confidence. Investors and policymakers will now be looking at upcoming economic data and ECB signals for further insights into the strength of Germany’s recovery.
