Germany January final services PMI 50.7 vs 50.4 prelim | Forexlive

• Composite PMI 49.9 vs 49.7 prelim

The final readings reaffirm a marginal growth in Germany’s services sector – the first in seven months – while overall business activity also improved to near flat levels in January. The drop in new business did ease and both input cost and output price inflation retreated slightly
further from their record highs. S&P Global notes that:

“A slight rise in services activity in January indicates that
the German economy has started the year on a more
stable footing and reduces the chances of a technical
recession (i.e. consecutive quarterly falls in output), after
GDP contracted in the three months to December.

“Recession or no recession, demand remains under
pressure from high prices and tightening financial
conditions. A further decrease in service sector new
business indicated that January’s upturn in activity was
largely supported by catch-up effects as firms worked
through backlogs, and that a pick-up in demand is needed
for sustained growth. Businesses’ optimism towards
growth prospects has increased, though expectations
remain lower than the pre-pandemic average.

“A solid and accelerated rise in service sector employment
in January underscores the continued resilience of the
German labour market and reassuringly shows limited
spillover from the recent slowdown in workplace activity.

“However, firms’ willingness to continue hiring staff
is giving power to employees when it comes to wage
demands, which the survey shows is helping drive a
continued sharp rise in service sector business costs.
Services output price inflation is likewise showing a
degree of stickiness, signalling a risk that core inflation
could stay higher for longer.”