German services sector stabilises in June, PMI shows

BERLIN (Reuters) -Germany's services sector showed signs of stabilisation at the end of the second quarter, with business activity experiencing only a marginal decline in June, a survey showed on Thursday.

The HCOB final services Purchasing Managers' Index rose to 49.7 in June, up from May's 2-1/2-year low of 47.1 but slightly below the preliminary reading for June of 49.4.

Any reading above 50 indicates expansion, while a reading below that number signals contraction. 

"Service providers have been having somewhat of a tough time for three months now," said Hamburg Commercial Bank chief economist Cyrus de la Rubia, adding that since the COVID-19 pandemic, activity in the sector has been more volatile.

The survey revealed an easing decline in new business as well as a fall in work backlogs for the 14th month in a row. 

Employment continued to rise modestly for the sixth consecutive month, as firms sought to expand capacity.

"Taking a positive view, this could be interpreted as meaning that service providers are confident that they will soon receive more orders," said de la Rubia.

"Being a bit more sceptical, higher employment could suggest that more people are needed to achieve a similar level of activity as before."

Due in part to the government's economic stimulus package, "we expect economic growth in Germany to pick up in the second half of the year, benefiting not only the construction sector and industry, but also the service sector," he said. 

The composite PMI index, which comprises services and manufacturing, climbed to 50.4 in June from 48.5 in May.

(Reporting by Miranda Murray; Editing by Hugh Lawson)