Germany: Services PMI falls in July
The HCOB Germany Services Purchasing Managers’ Index (PMI) fell to 52.5 in July from 53.1 in June. As a result, the index remained above the 50.0 no-change threshold, but signaled a softer improvement in services-sector business activity compared to the previous month.
July’s downtick stemmed primarily from a softer increase in new business, which firms in part attributed to a modest decline in demand from international customers. As a result, outstanding business fell at the sharpest rate since February and service providers cut staff accordingly; this marked the first dip in employment since December 2023.
Shifting to prices, the service sector saw a slight uptick in input cost inflation for the first time in five months amid higher wages. Nonetheless, output charges rose at the slowest pace since April 2021. Lastly, business sentiment improved slightly after a notable drop in the previous month, despite remaining below the recent peak observed in May.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, commented:
“Growth could keep slowing down in the next few months. New business only grew a little in July, and outstanding business has been dropping almost continuously since mid-2023. If the service sector stalls, the whole economy could slip into a recession because manufacturing continues to shrink sharply.”