Germany Private Sector Activity Shrinks for 2nd Month

The S&P Global Germany Composite PMI was revised higher to 48.8 in May 2026 from a preliminary of 48.6 and compared to 48.4 in April, but continuing to signal a second straight month of contraction in private sector activity. The services sector continued to fall (48.1 vs 46.9) while manufacturing stalled (50.1 vs 51.4). There were broad-based decreases in new work, employment and backlogs. On the price front, input cost inflation accelerated to a 42-month high, but average charges for goods and services rose more slowly than in April. On the other hand, business expectations improved in both monitored sectors.

The S&P Global Germany Composite PMI edged up to 48.6 in May 2026 from 48.4 in April, compared to forecasts of 48.4, preliminary estimates showed. The reading pointed to a second straight month of contraction in private sector activity, amid a backdrop of weakening demand and elevated inflationary pressures. The downturn continued to be led by the service sector (47.8 vs 46.9), although there was a stalling of the manufacturing sector (49.9 vs 51.4) as factory orders fell back into decline. Input cost inflation rose to the quickest for three and-a-half years, mainly due to commodities and transportation cost, reflecting the disruption from the effective closure of the Strait of Hormuz. Meanwhile, output inflation slowed, suggesting businesses shouldering a greater proportion of the burden and hinting at an increased squeeze on company margins. Also, the pace of job losses gathered pace, despite business expectations showing a partial rebound from April's low.

The S&P Global Germany Composite PMI was revised slightly higher to 48.4 in April 2026 from a preliminary estimate of 48.3, down from 51.9 in March, signalling a contraction in private sector activity for the first time since May 2025. The downturn was driven by the services sector, which recorded its sharpest contraction in nearly three and a half years (46.9 vs 50.9 in March), reflecting a further squeeze on demand linked to the war in the Middle East. Meanwhile, manufacturing continued to expand, albeit at a slower pace (51.4 vs 52.2), partly supported by stockbuilding. New business declined at the fastest rate since May last year, weighed down by weaker demand for services. Employment and business expectations also deteriorated across both sectors, led by manufacturing, while input costs and output prices rose at broadly faster rates.