Upturn in Germany’s service sector slows further in September

Upturn in Germany’s service sector decelerated further in September, with new business and output growing just marginally. The seasonally adjusted Markit Germany Services PMI Business Activity Index dropped to a 39-month low of 50.9 in September from 51.7 in August, signalling a further slowdown in activity growth. Furthermore, the average PMI print for the third quarter as a whole came in the worst in more than three years.

In the meantime, the final Markit Germany Composite Output Index, which gauges the combined output of manufacturing and service sectors, came in at 52.8 in September. This is down from 53.3 in August and the lowest in almost one-and-a-half years.

The latest survey results indicate towards only marginal growth of new business place with German service providers. Even if the current sequence of continuous growth now extends to 21 months, the latest rise was the least marked in more than one year. In spite of the overall slowdown in new business wins, growth continued to be solid at Financial Intermediation firms, according to sector data, noted Markit.

Consistent with the trends for activity and new business, employment growth also weakened in September; however, the pace of job creation was widely consistent with the 2016 average so far. Meanwhile, levels of business outstanding in Germany’s service sector dropped further in September, hence indicating towards ongoing spare capacity in the sector.

Meanwhile, output prices increased at the most rapid pace in seven months in September. Panellists have partially linked this to increased demand. Input costs have also continued to rise in September, with the pace of inflation up slightly since August. However, the latest rise was softer than the long-run average. Regarding future activity, service providers’ expectations were optimistic. According to panellists, this was due to increasing sales, efficiency improvements and new customers.