German Service Sector Contracts for a Third Month

Germany’s Services PMI was revised sharply higher to 48.6 in June 2026, up from the preliminary estimate of 46.8 and above May’s final reading of 48.1. However, the latest figure still signaled a third consecutive month of contraction in service activity, as weak demand continued to weigh on the sector. New orders declined for a fourth straight month, with the drop more pronounced than in May. Firms cited challenging economic conditions, including tighter financial constraints and low domestic confidence, as key factors. A marked decline in foreign demand also contributed to the overall reduction in new business. Outstanding business continued to shrink, employment levels fell for a sixth month, and backlogs were depleted at the fastest rate since August 2025. On prices, both input and output cost inflation slowed from recent highs, partly due to lower fuel costs. Finally, business confidence weakened further in June.

The S&P Global Germany Services PMI declined to 46.8 in June 2026 from 48.1 in May, well below the market forecast of 49, according to flash estimates. This was the third consecutive month of contraction and the most pronounced since November 2022. New orders dropped at the fastest pace in nearly two and a half years, with respondents citing deteriorating economic conditions and heightened market uncertainty. Cost inflation in the sector eased, although it remained elevated by historical standards. Average charges for services rose at the slowest pace in three months, but one that was still above the long-run average. Confidence among service providers fell slightly after rebounding in May, though it remained comfortably above April’s recent low.

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.