April saw Germany's service sector slip back into contraction after having grown in each of the previous four months, the latest HCOB PMI survey showed.
Service providers were meanwhile a lot less optimistic about the year-ahead outlook than the month before, amid reports from panellists of concerns towards tariffs and related uncertainty.
Employment defied the deteriorations in both current conditions and firms' expectations, however, rising at the quickest rate for nearly a year. Wages were a key factor behind an accelerated rise in input prices in the sector, but services firms were less aggressive with price increases due to competition for new work.
The headline HCOB Germany Services PMI Business Activity Index recorded a reading of 49.0 in April, falling from 50.9 in March and registering below the 50.0 no-change threshold for the first time since November last year.
The decrease in activity, which was modest but nevertheless the quickest since February 2024, was attributed by surveyed businesses to weaker demand and customers scrutinising spending amid economic and political uncertainty.
The amount of new work received by German services firms decreased during April, the eighth month in a row in which this has been the case. April saw a notable reduction in service providers' growth expectations for the coming year.
Latest data meanwhile indicated a slightly accelerated rise in input prices across the German service sector, with the rate of cost inflation ticking up from a five-month low in March and moving further above its long-run average.
Average prices charged by services firms, on the other hand, rose more slowly at the start of the second quarter.
The HCOB Germany Composite PMI Output Index came in at 50.1 in April, down from March's 51.3 and signalling virtually no change in the level of business activity at the start of the second quarter.
Expectations towards future output meanwhile sank to the lowest for six months, reflecting a drop in confidence in both sectors. New business fell only slightly, registering its weakest decline in almost a year, as a marginal increase in manufacturing new orders coincided with a slower fall in new work across the service sector. New export business came close to stabilising.
Total employment was broadly unchanged, having fallen in each of the previous ten months. Input cost inflation was at six-month low due to an increased drag from falling manufacturing input costs, but output prices increased at a slight faster rate amid a renewed upturn in factory gate charges.