Germany's services sector saw a modest recovery in October 2024, with the flash services PMI revised up to a final 51.6, a three-month high. The flash composite PMI was also revised firmer to 48.6 but remained below the 50-growth threshold. Weak underlying demand persisted, as new business orders fell for a second month, weighed down by sluggish manufacturing, fewer public sector opportunities, and declining international demand, particularly from Europe.

While firms cleared backlogs to support activity, reduced incoming work led to job cuts for the fourth consecutive month, marking the longest period of employment decline since early 2020. Wage increases caused a slight uptick in cost pressures, but overall inflation remained near multi-year lows. Service providers raised prices cautiously, with output price inflation at one of its slowest rates since April 2021.

Growth expectations improved slightly from September's low, buoyed by hopes of lower inflation and new product launches. However, optimism remained historically muted due to ongoing economic uncertainties. All that said, today's update puts the RPI at 45 and the RPI-P at 41, both measures showing overall economic activity running well ahead of market expectations.

Forecasters see the composite final unchanged from 48.4 in the flash. Services are also seen steady in the final reading for October from 51.4 in the flash.

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.