Germany Services Sector Growth Reaches Four-Month High in February
Germany’s services sector recorded stronger business activity in February, reaching its fastest growth rate in four months. The improvement was driven by rising demand and increased new business orders, according to a survey conducted by S&P Global before the recent escalation of tensions involving the United States, Israel, and Iran.
Germany Services PMI Signals Stronger Expansion
The final HCOB Germany Services PMI Business Activity Index climbed to 53.5 in February, up from 52.4 in January. The figure remained well above the 50-point threshold that signals economic expansion, marking the highest reading since October.
The latest PMI data suggests that the German services sector is growing at a faster pace than its long-term average, indicating improving business conditions across the industry.
Demand and Export Orders Support Growth
The increase in business activity was largely supported by stronger demand, with new business orders rising for the fifth consecutive month.
In particular, new export orders recorded their strongest increase since May 2023, highlighting growing international demand for German services.
Employment Declines Despite Strong Activity
Despite the positive business momentum, the services sector continued to face employment challenges.
Job levels declined for the second consecutive month, with the rate of layoffs reaching the fastest pace since June 2020 during the COVID-19 pandemic. Companies reported that rising labor costs were forcing them to reduce staff numbers or avoid replacing departing employees.
Cost Pressures Remain Elevated
Input costs in the sector remained relatively high, although input price inflation slowed slightly compared with January, when cost pressures reached a peak.
Businesses continued to pass some of these higher costs on to customers, though the rate of price increases eased compared with previous months.
Hamburg Commercial Bank chief economist Cyrus de la Rubia described the February data as a sign of solid sector performance but noted that companies remain cautious about hiring.
He explained that while business conditions have improved, firms may need greater economic certainty before expanding their workforce again.
German Private Sector Growth Strengthens
The German composite PMI, which combines both manufacturing and services activity, also showed stronger growth.
The index rose to 53.2 in February, up from 52.1 in January, signaling a broader expansion across Germany’s private sector economy.
