Economic Buzz: German services PMI remains in contraction, though decline eases in June

Germany?s services sector remained in contraction for the third consecutive month in June, although the pace of decline eased slightly as weak demand continued to weigh on business activity, according to the latest S&P Global PMI survey.

The S&P Global Germany Services PMI Business Activity Index rose to 48.6 in June from 48.1 in May but stayed below the 50.0 no-change mark, signalling a moderate contraction. The latest reading was the highest in the current three-month downturn.

New business declined for the fourth straight month, with firms citing difficult economic conditions, tighter financial conditions and weak domestic confidence. New export orders also fell sharply, contributing to another decline in outstanding business. Backlogs decreased at the fastest pace since August last year.

Employment fell for the sixth consecutive month, although the pace of job losses eased to the weakest during the current period of decline.

Cost pressures moderated significantly in June, helped partly by lower fuel prices. Input price inflation eased to its lowest level since November last year after reaching a three-year high in April and remaining elevated in May. Output price inflation also slowed to a three-month low, though businesses continued passing higher costs on to customers.

The S&P Global Germany Composite PMI Output Index improved to 49.5 in June from 48.8 in May but remained below 50.0, marking a third straight month of contraction as weakness in services outweighed stronger manufacturing output.

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