Germany Services Sector Contracts at Softer Pace

The S&P Global Germany Services PMI rose to 47.8 in May 2026 from 46.9 in April, above market expectations of 47.0, according to flash estimates. Despite the increase, this still marked the second consecutive month of contraction in the services sector. New orders declined for a third straight month, with firms citing customer hesitancy amid elevated economic and geopolitical uncertainty, as well as pressure on spending power from rising prices. Export orders also dropped. Input prices rose sharply, while the slower increase in output prices suggested that frims were absorbing a greater share of rising costs. Employment in the sector also declined at a faster pace. Lastly, business sentiment improved but stayed subdued.

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.