Germany's service sector maintained solid business activity growth in June, though momentum slowed. The services PMI fell to a three-month low of 53.1 from May's 54.2. The composite output index also dropped to 50.4, indicating slower private sector growth. Service sector growth eased while manufacturing output declined further. Cost inflation in the service sector hit its lowest since March 2021, though wage pressures kept input prices elevated. Output price inflation rose slightly from May's low while manufacturing prices fell.

June's activity rise was driven by increased marketing, lower interest rates, the European football championships, and stronger demand. New business inflows grew for the third consecutive month, albeit at a slower pace. Employment rose for the 42nd month, but job creation slowed sharply from May's high. Optimism about future growth is positive partly due to the temporary boost from the football matches.

Input costs grew at the slowest rate in over three years, yet remained high due to wage pressures. Output prices continued to rise significantly.

The June update suggests that while Germany's service sector continues to support the economy, slower growth and cost pressures, combined with challenges in the manufacturing sector, suggest a cautious outlook for sustained economic recovery.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.