Economic Buzz: German services growth slows sharply amid weak demand and rising costs
The Germany Services PMI Business Activity Index fell to 50.9 in March from 53.5 in February ? its lowest level since September and only slightly above the 50 mark that separates growth from contraction. This indicates a modest pace of expansion, below the long-term average.
The slowdown was mainly due to weakening demand. New business declined in March, ending a five-month growth streak, with companies citing the impact of the Middle East conflict, rising fuel prices, and tighter financial conditions. New export business also fell slightly after three months of growth.
Some activity was supported by firms working through existing orders, but backlogs declined at the fastest pace since last September, showing reduced pipeline strength.
At the same time, cost pressures increased sharply. Input price inflation rose to its highest level since February 2024, driven by higher fuel costs, wages, interest rates, and raw materials. However, companies were unable to fully pass on these costs, with selling prices rising at the slowest pace so far in 2026.
Employment in the services sector declined for the third straight month, as firms cited financial pressure, lower capacity use, and a weaker outlook.
Overall business confidence also weakened, falling to its lowest level this year and below the long-term average, amid concerns over energy prices and geopolitical uncertainty.
The Germany Composite PMI Output Index eased to 51.9 in March from 53.2 in February, with the slowdown driven entirely by services, while manufacturing output growth remained strong.
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