Germany Services Sector Remains in Contraction

The S&P Global Germany Services PMI was revised higher to 48.1 in May 2026 from a preliminary of 47.8 and 46.9 in March but remained below the 50 threshold. New business fell for a third straight month, though the decline was only marginal and the weakest in the current sequence. However, export business recorded its sharpest drop in a year. Lower inflows of work led to another reduction in outstanding business, while firms continued to cut staff levels, extending the current run of job losses to five months, albeit at a slower pace. Input price inflation remained close to April’s three-year high amid rising energy, transport, and wage costs. Firms passed some of these increases on to customers through higher selling prices, although output price inflation eased slightly due to strong competition and resistance to price increases. Looking ahead, confidence improved to a three-month high as firms expressed hopes for a more favourable geopolitical environment.

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. Still, this 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 firms 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.