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Germany’s Services Sector Nears Recovery in July

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Germany’s services sector showed signs of stabilising in July as business activity contracted at a much slower pace and demand began to recover. The HCOB Germany Services Purchasing Managers’ Index (PMI) rose to 49.8 from 48.6 in June, its highest reading in recent months and just below the 50-point mark that separates contraction from growth.

The survey showed new business increased for the first time in five months, signalling improving demand, while employment declined at the slowest pace since job cuts began earlier this year. Export orders continued to fall but at the weakest rate in five months, suggesting external demand is also stabilising.

Despite the improvement, rising input costs and higher prices charged by businesses highlighted persistent inflationary pressures. Analysts warned that uncertainty surrounding the Iran war, volatile energy prices, and supply chain disruptions continue to pose risks, although Germany’s broader economy returned to growth in July as stronger manufacturing activity lifted the composite output index above the expansion threshold.

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Euro Zone Business Activity Rebounds in July

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Business activity across the euro zone accelerated to an eight-month high in July, driven by a recovery in the services sector and continued strength in manufacturing. The S&P Global Euro Zone Composite PMI rose to 52.0 from 50.0 in June, moving back into expansion territory for the first time since March, while the Services PMI climbed to a five-month high of 51.7.

The improvement was broad-based, with Germany returning to growth and stronger performances recorded in Italy and Spain. France remained the only major economy still in contraction, although at a slower pace. New orders increased at their fastest rate since November, employment stabilised after six months of declines, and business confidence improved despite ongoing geopolitical uncertainty.

Analysts said the conflict in the Middle East, particularly the Iran war, continues to cloud the economic outlook. While inflation in input and output costs eased, euro zone inflation edged up to 2.9% in July, reinforcing expectations that the European Central Bank could raise interest rates again in September, potentially weighing on consumer spending and business demand.

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Germany’s Service Sector Growth Slows to Seven-Month Low

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Germany’s service sector growth lost momentum in March, with business activity slowing sharply due to weakening demand linked to the ongoing Middle East conflict. The latest survey by S&P Global showed that the services Purchasing Managers’ Index (PMI) fell to 50.9 from 53.5 in February, marking its lowest level in seven months, though still slightly above the 50 threshold that indicates growth.

The slowdown has been attributed to rising costs, particularly fuel prices, and increased economic uncertainty. According to analysts at S&P Global Market Intelligence, service providers are struggling to pass on higher costs to customers due to weaker demand. New business inflows declined for the first time since September, highlighting the immediate impact of geopolitical tensions on the sector.

Business confidence has also taken a hit, with expectations dropping to a three-month low. The overall composite PMI, which combines manufacturing and services, slipped to 51.9 in March from 53.2 in February, largely driven by the downturn in services. Analysts warn that elevated energy prices, supply chain disruptions, and ongoing uncertainty could continue to weigh on Germany’s economic growth in the coming months.

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