Firms reported improved demand conditions and were much more optimistic about the outlook than the month before. Even so, January saw a renewed decline in employment across the services economy, with workforce numbers falling at the joint-quickest rate since the pandemic.

Firms meanwhile faced a sharp increase in costs and raised output charges accordingly. The rates of input and output price inflation were the highest recorded since early 2025.

The headline HCOB Germany Services PMI Business Activity Index is based on a single question asking how the level of business activity compares with the situation the month before. A reading above 50.0 signals expansion, and the further above 50.0 the faster the rate of growth signalled.

At 52.4 in January, the index pointed to a fifth successive month of growth. However, this latest reading was down from 52.7 in December and the lowest since September last year.

The HCOB Germany Composite PMI Output Index ticked up from December's 51.3 to 52.1 in January, as a renewed upturn in manufacturing production offset slower growth in services business activity. After declining fractionally in December, total inflows of new business rose for the third time in four months in January.

This was helped by a broad stabilisation in export sales. Business expectations improved in both monitored sectors, leading overall confidence to rise to its highest since May 2024. Despite this, however, broad-based job shedding saw employment post its steepest fall in 14 months.

The decline in workforce numbers was recorded alongside further decreases in backlogs of work in both manufacturing and services, as well as a general uptick in cost pressures.

Average input prices rose at the fastest rate in almost three years in January. Output charge inflation accelerated sharply to a 23-month high, which owed largely to greater price increases for services as factory gate charges posted a further (albeit slightly slower) decline.

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