Germany's services sector slipped back into contraction in April, with the services PMI falling to 49.0, its lowest in 14 months and 0.2 points above the consensus. This decline, driven by weaker demand and cautious consumer spending amid tariff-related uncertainty, marked the end of a four-month expansion streak. Optimism faded, with business sentiment hitting a seven-month low, as only 25 percent of firms remained positive about the year ahead.

Despite this, employment rose at its fastest pace in nearly a year, reflecting a paradox of hiring amid declining output. Cost pressures intensified due to wage growth, yet firms were hesitant to pass on these costs aggressively, fearing customer loss in a competitive market.

Meanwhile, the Composite PMI edged down to 50.1, 0.4 points above the consensus and signalling stagnation in overall private sector output. Although manufacturing saw its strongest output in over three years, it failed to offset the decline in services. New business and exports showed tentative signs of stabilisation, but confidence remained subdued across sectors.

Overall, April's data points to growing economic caution and the fragile balance between inflation pressures, weak demand, and labour market resilience. This latest update takes the German RPI to 22 and the RPI-P to 23, meaning that economic activities are well ahead of the expectations of the German economy.

No change from the flash at 49.7 is the call for the April composite final, down from 51.3 in March. No change is expected from the flash at 48.8 for services, down from 50.9 in March.

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.