Germany’s Private Sector Contracts at Fastest Pace Since 2024 as Services Activity Weakens

Germany’s private sector activity contracted for a third consecutive month in June, according to preliminary data released by S&P Global, as weakness in the services sector offset continued expansion in manufacturing output.

The S&P Global Flash Germany Composite Purchasing Managers’ Index (PMI) declined to 48.0 in June from 48.8 in May, falling short of market expectations of 49.9. The reading marked the lowest level since December 2024 and remained below the 50-point threshold that separates expansion from contraction.

The slowdown was driven primarily by the services sector, where the PMI fell to 46.8 from 48.1 in May, reaching its lowest level in 43 months. By contrast, manufacturing output continued to expand, with the sector index rising to 50.8 from 50.4, indicating modest growth among industrial producers.

According to S&P Global, underlying demand conditions remained weak during the month. New business inflows declined for a fourth consecutive month and at the fastest pace since December 2024, reflecting what survey respondents described as deteriorating economic conditions and increased uncertainty across markets.

Employment levels also continued to decline across Germany’s private sector, extending a trend that has persisted amid softer demand and cautious business sentiment.

Inflationary pressures, however, continued to moderate. Input costs rose at their slowest pace in four months, while prices charged by businesses increased at the slowest rate in three months, according to the survey data.

Business confidence also weakened during the month, suggesting that companies remain cautious about the near-term economic outlook despite signs of stabilization in parts of the manufacturing sector.

The latest PMI figures highlight divergent conditions within Germany’s economy, with manufacturing output showing modest expansion while service-sector activity continues to face headwinds. Future economic releases may provide additional insight into demand trends, inflation dynamics, labor market conditions, and broader business activity across Europe’s largest economy in the months ahead.