Germany’s Private Sector Growth Hits Two-Year High in October
Germany’s private sector expanded at its fastest pace in more than two years in October, driven by strong growth in services activity, according to a survey released on Friday.
Composite PMI Surpasses Expectations
The HCOB Flash German Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 53.8 in October from 52.0 in September. This marks the strongest reading since May 2023, beating analysts’ forecasts of 51.5.
It was also the fifth consecutive month that the composite index stayed above the 50 threshold, signaling continued economic expansion in Europe’s largest economy. The index tracks both services and manufacturing, which together make up more than two-thirds of Germany’s total output.
Services Sector Drives Growth
The services sector led the upturn, recording its sharpest rise in activity in over two years. The sector’s PMI climbed to 54.5 in October from 51.5 in September, highlighting robust demand and improving sentiment among service providers.
“This is an unexpectedly good start to the final quarter,” said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. He added that manufacturing output also rose for the eighth straight month, though at a slower pace compared to September.
Manufacturing Still in Contraction
Despite the improvement, the manufacturing PMI remained below the growth line, inching up to 49.6 from 49.5 in September — slightly better than expected. While factory activity remains subdued, the continued recovery in output suggests stabilization in the sector.
“These are good conditions for growth in the fourth quarter,” de la Rubia noted. However, he cautioned that business confidence has weakened, reflecting ongoing economic fragility.
Outlook Remains Cautious
The survey showed that business expectations for the coming year have softened due to persistent domestic challenges, geopolitical uncertainty, and high input costs.
Employment in Germany’s private sector also continued to decline, though at a slower rate. October marked the 17th consecutive month of job cuts, the longest streak since the 2008–2010 financial crisis.
