Germany Services Sector Contracts the Most Since 2022

The S&P Global Germany Services PMI fell to 46.9 in April 2026, down from 50.9 in March, marking the first contraction in business activity since August 2025. The latest reading also signaled the fastest decline in activity since November 2022, with firms attributing the downturn to the ongoing Middle East war, which led to a significant reduction in new orders. New business inflows dropped at the sharpest rate since January 2024, partly due to weakening export sales, which saw their steepest decline in seven months. Backlogs of work fell sharply, while job cuts accelerated as companies opted not to replace departing employees and, in some cases, implemented layoffs. On the price front, input cost inflation reached a three-year high, and output price inflation hit its highest level in over two years. Business confidence also plummeted to its lowest point in more than two-and-a-half years, driven by expectations of higher energy costs, rising inflation, and weak market sentiment.

Germany’s flash Services PMI fell sharply to 46.9 in April 2026 from 50.9 in March, missing expectations of 50.3 and marking the deepest contraction since November 2022. The data points to a significant downturn in service sector activity, with business volumes posting their steepest decline in nearly three and a half years. New orders dropped notably, highlighting weakening demand, while input cost inflation accelerated to its fastest pace since March 2023. Service providers also raised output prices at the strongest rate in 35 months, signaling persistent price pressures. Employment declined further as firms reduced staffing levels, and backlogs of work fell at a faster pace, reflecting softer demand and ongoing pressure across the sector.

The HCOB Germany Services PMI was revised lower to 50.9 in March 2026 from a preliminary reading of 51.2, down from 53.5 in February. This marked the weakest growth in services activity since a contraction in August 2025. New orders fell, ending a five-month sequence of growth, as firms reported heightened uncertainty among customers and a squeeze on spending due to rising fuel prices amid the Middle East war. This reflected a modest decrease in orders from abroad, following three consecutive months of growth. Employment also fell for the third month in a row. Input price inflation surged to its highest level since February 2024, moving further above its long-run average, while prices charged rose at the slowest pace recorded so far in 2026, though still above the historical trend. Moreover, business confidence dropped to its lowest level year-to-date, falling below its long-run average amid concerns over elevated energy prices, supply chain disruptions, and geopolitical uncertainty.