German business activity ends year in contraction territory, PMI shows

By Maria Martinez

BERLIN (Reuters) – Germany’s economic downturn eased slightly in December but business activity still contracted for a sixth month running, according to a survey published on Monday.

The HCOB German flash composite Purchasing Managers’ Index, compiled by S&P Global, rose to 47.8 from 47.2 in November, but remained in contraction territory. Analysts polled by Reuters had forecast a reading of 47.8.

The business activity index for Germany’s services sector rose to 51.0 in December from 49.3 in November, beating the forecast of 49.4. Any reading above 50 indicates expansion.

“This improvement in services is a good counterbalance to the quicker decline in manufacturing output, giving some hope that GDP might not have shrunk in the last quarter of the year,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Germany dodged a technical recession in the third quarter but the government expects output to contract by 0.2% in 2024 as a whole, making Germany a laggard among leading world economies.

The German economy has been dogged by intensifying competition from abroad, weak demand and an industrial slowdown. To boot, a budget row brought down the country’s three-way coalition and has left Europe’s largest economy in political limbo until snap elections in February.

“The manufacturing sector did not exactly deliver any holiday cheer,” de la Rubia said. “This is certainly no big shock, given all the negative news about companies planning restructurings.”

The manufacturing index worsened slightly, falling to 42.5 from 43.0 the previous month and remaining nowhere near growth. Analysts had expected a small increase to 43.3.

(Reporting by Maria Martinez; Editing by Toby Chopra)