Germany’s private sector returned to contraction in April, according to HCOB flash PMI, as concerns over tariffs and economic uncertainty dented business confidence and demand. The Composite PMI fell to 49.7 from 51.3 in March, slipping below the 50.0 mark that separates growth from contraction.
The decline was driven by the service sector, which saw its first drop in activity since November and the sharpest fall since February, with its PMI at 48.8. Meanwhile, manufacturing output continued to grow modestly for a second month, though at a slower pace (PMI at 51.6).
Business sentiment hit a six-month low, with both manufacturers and service providers scaling back their expectations. Service firms were particularly affected, citing tariff-related uncertainties that delayed client decisions and spending.
New orders rose slightly in manufacturing—buoyed by the first increase in export sales in over three years—but fell in services. There were signs that some manufacturing gains were driven by early ordering and stockpiling.
Employment fell for the eleventh month in a row, though only slightly. Job losses in manufacturing contrasted with the strongest rise in service sector employment since May 2023.
Price trends were mixed. While factory gate prices rose for the first time in nearly two years, overall inflation in goods and services prices edged up only slightly. Manufacturers benefited from falling input costs due to cheaper commodities and a stronger euro, while service providers faced rising expenses.
Backlogs of work continued to decline, pointing to weak capacity pressure across the sector.