Germany's service sector rebounded in July 2025, returning to growth for the first time in four months, as the services PMI rose to 50.6 from 49.7 in June, a modest increase but nonetheless a 4-month high. The composite PMI also reached 50.6, signalling a cautiously optimistic turn in overall private sector activity. This upturn was driven by a marginal increase in domestic demand, workforce expansion, and new service offerings, although inflows from abroad continued to decline.

Despite this positive momentum, employment growth slowed to its weakest pace in the year, reflecting caution among firms, some hiring to meet rising demand, and others holding back due to attrition. Backlogs of work continued their 15-month decline, aided by expanded staff capacity. Encouragingly, inflationary pressures eased sharply. Input and output price increases hit their lowest levels since early 2021, signalling effective cost containment, although prices remain slightly above pre-pandemic norms.

Looking ahead, service providers expressed growing confidence, supported by expectations of increased consumer spending, interest rate cuts, and government stimulus. Overall, the July figures suggest a fragile yet hopeful revival in Germany's service sector, with inflation cooling and demand stabilising, though challenges in external markets remain. The latest update takes the RPI to 4 and the RPI-P to minus 6, meaning that economic activities are within the expectations of the German economy.

No change from the flash at 50.3 is the call for the July composite final, nearly flat from 50.4 in the June final. No change is expected from the flash at 50.1 for services versus 49.7 in the June final.

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.