German Services Sector Growth Surprises on the Upside

The HCOB Germany Services PMI was revised slightly higher to a four-month high of 53.5 in February 2026 from a preliminary of 53.4, and compared to 52.4 in January, final figures showed. Growth was driven by stronger demand, as firms reported winning new clients and securing large projects. New business increased for a fifth straight month, with export orders posting their strongest rise since May 2023. Backlogs of work rose slightly, only the third increase in over two-and-a-half years, reflecting improved demand. However, employment declined for the second consecutive month, with the pace of job losses the fastest since June 2020. Cost pressures remained steep, mainly due to wages, energy, transport, and supplier prices, though input inflation eased slightly from January’s peak. Firms continued raising output prices, but less aggressively. Confidence dipped, but optimism stayed above average, supported by rising orders, hopes of broader economic recovery, and increased use of AI.

The HCOB Germany Services PMI rose to 53.4 in February 2026 from 52.4 in January, a four month high and above forecasts of 52.3, signaling a stronger pace of expansion in the services sector. Activity improved despite slower growth in new business, although new export orders continued to increase. Outstanding work fell only marginally, suggesting limited pressure on capacity. However, employment declined at the fastest pace since June 2020 as firms accelerated staff cutbacks. Job losses came alongside sustained cost pressures, with input prices rising sharply and only slightly below January’s 12 month high, driven largely by higher wages. Service providers again raised selling prices at a steep pace, though slightly softer than the previous month. Meanwhile, business expectations for the year ahead remained unchanged from January, indicating stable but cautious sentiment despite improving activity.

The HCOB Germany Services PMI fell to 52.4 in January from 52.7 in December, the lowest since September and below preliminary estimates of 53.3, but still signaling a fifth straight month of expansion. Activity and new business continued to grow, although at a slower pace, with firms reporting new clients and generally stronger demand, including from abroad. New export orders accelerated to the fastest growth since May 2023. At the same time, backlogs of work fell for a third month, pointing to limited capacity pressures, and employment declined at the sharpest pace since mid 2020 as firms cut staff amid rising costs. Input price inflation hit a 12-month high, driven mainly by higher labor and energy expenses, including a sharp rise in the minimum wage, prompting companies to raise selling prices at the fastest rate since last February. Despite cost pressures, business confidence improved, with expectations for the year ahead rebounding to the highest since May 2024.