Germany's Services Sector Sees Uptick in Activity

BERLIN (Reuters) – Germany's services sector experienced a slight increase in business activity in October, reaching a three-month high, although underlying demand remained weak, according to the HCOB Germany Services PMI survey released on Wednesday.

The PMI rose to 51.6 from 50.6 in September, marking the first acceleration in growth in five months. Any reading above 50 indicates expansion.

> “Germany's service sector remains resilient, undeterred by the sluggishness in manufacturing,” said Hamburg Commercial Bank economist Jonas Feldhusen.
> “Activity in the sector continues to rise steadily, maintaining modest growth and even gaining slight momentum in October.”

Despite the increase in activity, new business fell for the second consecutive month, leading to further job losses. Employment in the sector declined for the fourth month running, equaling the longest period of job shedding since 2009. This trend is attributed to a lack of new work and weak international demand, particularly from Europe.

Inflationary pressures eased, with output price inflation at its second-lowest in three-and-a-half years, although input costs rose slightly due to wage increases.

Firms remain cautiously optimistic about future growth, buoyed by hopes of a turnaround in the economy and improved purchasing power.

The HCOB Germany Composite PMI, which includes both services and manufacturing, remained in contraction territory at 48.6, up from 47.5 in September, as a slower decline in manufacturing output offset stronger services growth.

The data suggests that while Germany's services sector is showing some resilience, challenges remain due to weak demand and broader economic uncertainties.