Germany’s Private Sector Slips into Unexpected Contraction as Services Weaken
Flash data from the S&P Global Composite Purchasing Managers’ Index showed the Output Index fell to 48.3 in April from 51.9 in March. This marked the first reading below the 50-point threshold that separates expansion from contraction since May 2025. Economists had forecast a reading of 51.1.
The downturn was primarily driven by the services sector, where activity dropped sharply. The services index declined to 46.9 from 50.9, reaching its lowest level in 41 months.
Manufacturing remained in expansion territory, although momentum weakened. The manufacturing PMI slipped to 51.2 from 52.2, while output growth slowed to 51.7 from 54.0.
S&P Global noted that overall business activity weakened as the impact of the Middle East conflict filtered through to demand conditions, business confidence, and inflation trends.
New orders also fell at the fastest pace since December 2024. At the same time, business sentiment dropped to its lowest point since September 2024 and turned negative for only the second time in over two and a half years.
Phil Smith, economics associate director at S&P Global Market Intelligence, said business confidence had “darkened considerably” since the outbreak of the conflict, warning that prolonged weakness in activity alongside higher energy costs could further strain the labor market.
He also noted that firms responded to rising input costs by increasing prices at the fastest rate in more than three years in April, adding to inflationary pressure.
Purchasing Managers’ Index surveys are widely followed by financial markets because they provide an early indication of economic momentum and broader growth trends.
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