| Consensus | Consensus Range | Actual | Previous | |
| Composite Index | 48.6 | 48.6 to 48.6 | 48.8 | 48.4 |
| Services Index | 47.8 | 47.8 to 47.8 | 48.1 | 46.9 |
Highlights
Germany's private sector remained under pressure in May, although the latest PMI data suggest that the pace of deterioration is beginning to moderate. The composite PMI output index increased marginally from 48.4 in April to 48.8 in May, remaining below the 50-point threshold that separates expansion from contraction. This indicates that economic activity contracted for a second consecutive month, albeit at a slower rate.
The weakness was particularly evident in the services sector, where the services PMI rose from 46.9 to 48.1. While this represents an improvement, it still signals declining business activity and marks the first instance of back-to-back contractions in nearly a year. Firms attributed the downturn to reduced consumer spending power arising from higher energy costs, tighter financing conditions, and elevated economic uncertainty. These factors continue to suppress demand, resulting in falling new business volumes, declining backlogs, and ongoing workforce reductions.
A notable concern is the persistence of inflationary pressures. Input cost inflation accelerated to its highest level in 42 months, driven by rising energy, transportation, and labour costs. Nevertheless, firms were less able to pass these higher costs on to customers, as output price inflation eased from April's recent peak. This suggests that competitive pressures and weaker demand are limiting pricing power, potentially squeezing corporate profit margins.
Despite current challenges, the report contains encouraging forward-looking signals. Business confidence improved significantly, with expectations for activity over the next 12 months reaching a three-month high. Firms appear increasingly optimistic that geopolitical conditions may stabilise and support a gradual recovery. Overall, the data point to a German economy that remains fragile but may be approaching a turning point, where contraction is slowing and sentiment is beginning to improve, even as inflationary pressures continue to pose significant risks.
Market Consensus Before Announcement
No revisions expected from the flash at 48.6 for composite and 47.8 for services, suggesting ongoing declines in business activity.
Definition
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.
Description
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.