The German services PMI decreased from 52.5 in July to 51.2 in August, indicating that the German service sector continued to experience a decline in business activity growth for the third consecutive month even though it is still above the threshold of 50, meaning that business activities are expanding but at a slower rate compared to July. This modest expansion, which was the weakest since March, was supported by a significant reduction in export sales and virtually stagnant demand.

Despite a modest increase in output prices, input cost inflation decreased to its lowest level in three-and-a-half years, although it remains above pre-pandemic levels. The second consecutive month of employment decline, the most rapid since June 2020, underscores the presence of excess capacity and a decrease in incoming orders. Despite this, business confidence remained stable while firms maintained cautious optimism, influenced by their plans for enhanced marketing and their expectations for improved market conditions.

Nevertheless, the German composite PMI, which decreased to 48.4, indicates a more severe contraction in the German private sector generally. New business orders experienced their most substantial decline since March, primarily due to a substantial decline in manufacturing. Additionally, employment across sectors experienced the most precipitous decline in four years. This challenging environment resulted in a reduction in business expectations, particularly in the manufacturing sector, bringing the RPI to minus 10 and RPI-P to 5, which is relatively within the consensus of the German economy.

No revisions are expected to the flash data.

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.