Business activity in Germany's private sector found stability in January, ending a six-month contraction as growth in services balanced out a sustained decline in manufacturing output. This information comes from a survey released on Friday.
The HCOB German flash composite Purchasing Managers' Index, compiled by S&P Global, rose to 50.1 in January, up from 48.0 in December, hitting a seven-month peak and surpassing the 50.0 mark that distinguishes growth from contraction.
According to analysts polled by Reuters, a reading of 48.2 was anticipated.
"The PMI provides hope that Germany could emerge from the recessionary phase of the past two years," stated Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank.
For the year 2024, Germany's economy experienced a contraction, underscoring the severity of the downturn impacting Europe's largest economy.
The services sector exhibited resilience, with the business activity index for Germany's services sector climbing to 52.5 from 51.2, its highest level in six months, surpassing analysts' forecast of 51.0.
Although still in contraction, the manufacturing index rose to 44.1 from 42.5, outperforming expectations of an increase to 42.7.
"Manufacturing output is declining at the slowest rate since mid-2024, with an improved new order situation," noted de la Rubia.
While facing substantial pressure from international competition and customer hesitancy amid economic and political uncertainties, the survey demonstrated that the rate of decline in new export business was the gentlest in eight months.
Despite challenges in demand in both sectors, companies displayed heightened optimism about future activities, particularly in manufacturing, where confidence reached its highest level in nearly three years.