September saw an uptick in business activity growth across the German private sector, according to the latest ‘flash’ HCOB PMI survey data. Output rose to the greatest extent for 16 months, driven predominantly by a renewed upturn in the service sector.
There were, however, signs of fragile demand, with the latest data indicating a broad-based decrease in inflows of new work. Employment also fell in both monitored sectors, amid a general weakening of business expectations for the year ahead.
On the price front, September flash data showed a slight pick-up in inflationary pressures, with the rates of increase in input costs and output charges accelerating to their fastest for six and five months, respectively.
The HCOB Flash Germany Composite PMI Output Index registered above the 50.0 no-change threshold for a fourth straight month in September. Furthermore, rising from August’s 50.5 to 52.4, the index signalled a notable acceleration in the pace of growth to the quickest since May 2024.
The stronger performance at the end of the third quarter reflected a renewed increase in in service sector business activity (index at eight-month high of 52.5) that followed a slight decrease in August. Here, surveyed businesses often commented on the start of new projects.
Manufacturing output also rose on the month, maintaining a sequence of expansion seen since March, but the rate of growth ticked down slightly from August’s near three-and-a-half year high (index at 52.2). A lack of new business was a general theme across the private sector in September.
Firms generally used backlogs of work to support output levels during September. Although business expectations for the year ahead remained positive across the German private sector, September saw the degree of confidence soften for a second successive month and fall back below the long-run average.
Employment fell for a sixteenth successive month, with the pace of decline the fastest recorded so far this year.
Input cost inflation ticked up for the second month in a row in September, taking it to its highest since March. The rate of increase in output prices likewise ticked up at the end of the third quarter, bringing it back broadly in line with its long-run average.