Germany January final services PMI 52.5 vs 52.5 prelim

• Final Services PMI 52.5 vs. 52.5 expected and 51.2 prior.
• Final Composite PMI 50.5 vs. 50.1 expected and 48.0 prior.

Key findings:

• HCOB Germany Services PMI Business Activity Index at 52.5 (Dec: 51.2). 6-month high.
• HCOB Germany Composite PMI Output Index at 50.5 (Dec: 48.0). 8-month high.
• Inflationary pressures increase amid steep and accelerated rise in costs

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“This is an encouraging start to the year. Growth seems to have a chance again, as the composite PMI has climbed above
the 50-point mark for the first time in seven months. This is thanks to the service sector, which expanded its business activity
at a modest but faster pace than the previous month. The manufacturing sector isn’t dragging the overall economy down as
much anymore. Overall, the situation looks relatively good given the many uncertainties.

“The service sector is not very familiar with the word recession. Services companies have expanded their business activities
for most of the past year. Given the deep and prolonged recession in the manufacturing sector, this is surprising and good
news. Sectoral figures from Destatis suggest that growth in the education and health sectors was above average in 2024,
boosted by higher government spending. Some observers see this as a shift of resources from high value-added industry to
lower value-added services. But the highly productive information and communication services sector also grew strongly in
2024. Deindustrialization is not necessarily bad if new jobs are created in other competitive service sectors, and this seems
to be happening now.

“After a long dry spell, jobs are being created in the service sector again. This is encouraging, but one swallow does not
make a summer, so this monthly figure shouldn’t be overstated. The accelerated declines in order backlogs and new
business from abroad suggest that employment growth won’t continue unchecked.

“Price developments in the services sector are striking. Despite the overall weak economic situation, cost inflation has
accelerated, and selling prices have risen at the strongest rate since February 2024. According to some companies, higher
costs are related to rising wages and the increase in the CO2 tax, which impacts the hotel industry, for example. The fact
that services companies were able to pass on some of these higher costs shows a certain robustness in this sector.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.