Germany's services sector regained momentum in September, with the services PMI climbing to 51.5 from 49.3 in August, signalling its strongest expansion in eight months. The broader composite PMI also reached a 16-month high of 52.0, driven by firms completing backlogged projects even as demand fragility persisted.

The uptick in activity came despite continued headwinds as new business inflows fell for the second month in a row, export sales weakened, and companies faced the steepest job losses in over five years. Customers' caution, reflected in tighter budgets and reluctance to spend, has kept the demand environment subdued.

On the cost side, wage pressures remained the dominant driver of inflation. Input costs rose at a pace above the long-run average, while firms passed some of these expenses on through higher output charges. Service providers raised prices at the fastest rate in four months, underlining the inflationary strain in the sector.

Yet, optimism prevailed. Business expectations reached their highest level since May 2024, with firms hopeful of stronger economic conditions ahead. Indeed, September's data captures a sector in transition as activity is picking up, but job losses and weak demand signal that the recovery remains fragile. This latest update takes the RPI to minus 4 and the RPI-P to minus 8, meaning that economic activities are now within the expectations of the German economy.

The consensus sees the composite unrevised from the flash at 52.4 and services unrevised at 52.5.

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.