Germany's services sector sustained its growth momentum in March, but only just, with the services PMI slipping to 50.9, its lowest in four months. Despite this, the broader economy showed signs of resilience, as the composite PMI rose to a 10-month high of 51.3. The expansion was powered more by clearing backlogs and modest job creation than by new demand, which continued to fall at the fastest pace in six months.

Businesses cited weak external demand, intensified foreign competition, and a stronger euro as key drags. Still, optimism is building, fuelled by expectations of fiscal expansion, product innovation, and digital transformation. Encouragingly, inflationary pressures eased, with both input and output price increases cooling to their lowest levels in five months.

While costsespecially wagesremain historically high, pricing dynamics appear to be normalising. The divergence between business activity and new work signals a fragile recovery, suggesting that policy support and confidence-building measures may be crucial for sustaining growth in the months ahead. The latest update takes the German RPI to minus 23 and RPI-P to minus 18. This means that economic activities in Germany are falling short of market expectations.

No revision is expected for services from the flash at 50.2.

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.