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Back OfficeEconomic Buzz: German private sector slips back into contraction
The downturn reflected persistent weakness in demand, linked in part by surveyed firms to heightened uncertainty levels. Although business expectations rebounded from April's recent low, confidence remained subdued by historical standards and May saw the pace of job creation slow.
On the price front, latest data showed slightly weaker increases in both input costs and prices charged across the services economy. For the latter, the rate of inflation eased for the third month running to the lowest since October last year.
The headline HCOB Germany Services PMI Business Activity Index came in at 47.1 in May, down from 49.0 in April and at its lowest level since November 2022. A reading below 50.0 signals contraction, and the further below 50.0 the faster the rate of decline signalled.
May saw the HCOB Germany Composite PMI Output Index slip to 48.5, down from 50.1 in April and its first reading below the neutral 50.0 threshold since December last year.
This reflected a combination of slower manufacturing production growth and an accelerated decline in services activity. New orders decreased in both monitored sectors and posted the steepest overall drop so far this year.
Manufacturers saw export sales rise for a second straight month, but this was offset by weaker international demand across the service sector. Despite a broad-based improvement in business expectations, employment fell at the fastest rate for three months in May (though only slightly overall). Declining backlogs of work continued to highlight a lack of pressure on staffing capacity.
On the price front, latest data showed the slowest rise in average charges for goods and services for seven months, with renewed discounting among manufacturers seen alongside weaker pricing power in the service sector.
Similarly, overall cost pressures across the private sector were the softest since October last year.
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