German services growth lifts private sector in October

Germany's service sector activity climbed in October but private sector companies continued to cut staff numbers, survey results published by S&P Global showed on Friday.

The flash Hamburg Commercial Bank composite purchasing managers' output index improved to a 29-month-high of 53.8 points in October from 52.0 in September, beating the FXStreet-cited market consensus of a decline to 51.6. Going further above the neutral 50-point mark separating growth from contraction, it indicates the pace of growth accelerated in October.

The flash Germany services PMI business activity index rose to 54.5 points in October, also a 29-month-high, from 51.5 in September, and beating consensus of 51.0 points.

Despite the improvements, overall business expectations fell further below the long-run average to the weakest since April, S&P Global highlighted, with sentiment moderating in both manufacturing and services.

German companies noted domestic economic weakness, geopolitical tensions, high costs and business relocations to cheaper regions, amid waning international competitiveness.

"Despite faster growth of new work and higher backlogs, German private sector companies continued to shed staff in October. Employment fell for the seventeenth month running, the longest sequence of decline since that which ran from October 2008 to February 2010," S&P Global said.

"That said, the rate of decline slowed notably since September and was only marginal as service providers increased staffing for the eighth time in 2025 so far. Manufacturers on the other hand cut workforces at the strongest rate since June."

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank said: "The situation in the service sector is brightening. This is evidenced by significantly more business activity than in the previous month and a higher volume of new business. In addition, after two months of staff reductions, companies have stepped up their hiring again.

"One factor weighing on the sector is that costs have risen at an accelerated pace for the third month in a row. Above-average wage increases are likely to continue to have an impact here, as they are enforceable despite the deterioration in the labour market situation in the economy as a whole. At least service providers are in a position to pass on some of the cost increases to their customers, as sales prices have also risen more sharply than in the previous month."

The flash manufacturing PMI output index fell to 52.3 points in October from 53.0 in September. The flash manufacturing PMI rose to 49.6 points from 49.5, beating the consensus of 49.5 points.

de la Rubia said: "The situation in the manufacturing sector remains difficult. Although companies in this sector once again produced more than in the previous month, they are continuing to cut jobs at an accelerated pace. Added to this are the current problems surrounding supply chain issues in connection with semiconductors, which are particularly needed in the automotive sector, but also in mechanical engineering. The accelerated reduction in stocks of inputs and slower supplier delivery times may be linked to these uncertainties."

The PMI is compiled by S&P Global from responses to a questionnaire sent to a panel of around 800 companies in Germany's manufacturing and service sectors. The responses were collected between October 9 and 22.

Final manufacturing data will be released on November 3, with final services and composite indicators to follow on November 5.