Data published by HCOB showed that business activity in the private sector in Germany continued to contract in February, and reached a 4-month low, led by a sharp and accelerated reduction in manufacturing output. Demand for goods and services continued to weaken, although employment held broadly steady as firms expressed slightly more optimism towards the year-ahead outlook.
The Germany PMI Output Index fell to 46.1 points from 47.0 points in January. The index remains below the 50-point mark, which indicates a reduction in activity in the private sector, for the eighth month in a row. Economists had expected the index to rise to 47.5 points. The services PMI increased to 48.2 points from 47.7 points in January, while the manufacturing PMI fell to 42.3 points (4-month low) from 45.5 points. Economists had expected the services PMI to rise to 48.0 points and the manufacturing PMI to reach 46.1 points.
HCOB said that new orders in the private sector declined at the fastest pace in four months. Reports from surveyed firms highlighted general reluctance among customers amid economic uncertainty and tight financial conditions. In addition, a further large-scale reduction in new export orders was recorded. Meanwhile, employment declined only slightly and at the slowest pace since September 2023. With further strengthening of optimism in the services sector, overall business expectations improved to a 9-month high. However, this result masked a deterioration in sentiment in the manufacturing sector, which turned pessimistic for the first time since November last year. Data also showed that input cost inflation rose again in February, and reached its highest level since April 2023. Inflationary pressures remained centered on the service sector, while manufacturing purchase prices continued to fall. It was a similar picture for output prices, with higher charges in the service sector contrasting with further discounting across manufacturing.