German services and manufacturing PMIs beat expectations

Germany's private sector grew more than anticipated this month, according to flash purchasing managers' index estimates published by S&P Global on Friday.

The Hamburg Commercial Bank flash Germany composite PMI output index rose to a three-month high of 52.5 points in January, remaining in growth territory above the neutral 50.0-point mark, from 51.3 in December. FXStreet-cited consensus was for a smaller rise to 51.8.

The HCOB flash services PMI business activity index also increased to a three-month high, of 53.3 points in January, from 52.7 the prior month. Consensus was for a rise to 53 points.

Finally, the flash manufacturing PMI increased to 48.7 points, another three-month high but still in contraction territory, from 47.0, surpassing the 48.0 consensus reading. The manufacturing PMI output index returned to growth at 50.5, a two-month high, from 48.3.

"Business activity growth regained some momentum across Germany's private sector at the start of the year... with output levels rising at the quickest rate for three months," S&P Global said. "The upturn was supported by a renewed increase in inflows of new orders.

"However, despite business expectations for the year ahead also improving, January saw a deterioration in labour market conditions as employment fell at the quickest rate since mid-2020 and across both services and manufacturing."

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented: "The data show a good start to the new year, overall...Meanwhile, the International Monetary Fund has upgraded its 2026 GDP growth forecast for Germany by 0.2 percentage points to 1.1%, reinforcing the sense that growth prospects are improving.

"Still, the recovery remains rather fragile. The continued drop in inventories and another decline in backlogs of orders in manufacturing are clear examples. Yet, the unusually large fiscal stimulus through much higher spending on defence and infrastructure should provide a noticeable boost to the economy."

The HCOB Germany PMI is produced by S&P Global based on survey data from around 800 manufacturing and service companies, with responses collected between January 12 and 21. The flash estimate is based on around 85% of total PMI survey responses each month.

Final January data for German manufacturing activity will be out on February 2, while services and composite data will be released February 4.