FX.co ★ Germany Services PMI Falls to 4-Month Low

In January, the HCOB Germany Services PMI decreased to 52.4, down from 52.7 in December, marking the lowest level since September and falling short of the preliminary estimate of 53.3. Nevertheless, it still indicates the fifth consecutive month of growth. While activity and new business continued to see an increase, the pace has slowed. Companies reported the acquisition of new clients and a generally stronger demand, including a notable rise in international orders, which accelerated at the fastest rate since May 2023. Meanwhile, work backlogs declined for a third consecutive month, suggesting limited capacity pressures. Additionally, employment saw the most significant reduction since mid-2020, as firms cut back on staff due to escalating costs. Input price inflation reached a 12-month peak, primarily driven by increased labor and energy expenses, including a marked rise in the minimum wage. This prompted firms to raise their selling prices at the fastest pace since February of the previous year. Despite these cost pressures, business confidence saw an upswing, with expectations for the coming year reaching their highest level since May 2024.