Germany's economic slump showed signs of easing in March, with the service sector nearing stability, according to a monthly survey released on Thursday. The HCOB German Flash Composite Purchasing Managers' Index (PMI), which tracks both the services and manufacturing sectors and is compiled by S&P Global, rose to 47.4 in March from 46.3 in February, surpassing the forecasted increase to 47.0. However, this marks the ninth consecutive month of contraction in business activity, as any reading below 50 indicates contraction. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, warned that Germany is on the brink of a technical recession. "While there are signs of a turnaround in manufacturing worldwide – in February the global PMI moved into expansion territory for the first time since August 2022 – there are virtually no indications of a recovery in Germany. Incoming orders are continuing to shrink almost unabated, the reduction in employment even accelerated in March and companies have reduced their inventories of purchased goods more sharply than in any of the previous five months. The latter is surprising insofar as a stabilisation has recently been observed globally." Cyrus added. "So far, Germany has clearly not been able to participate in the global turnaround in the inventory cycle. However, we are confident that this trend will also arrive in Germany with a certain delay." The slight improvement in the PMI was primarily driven by the service sector, which saw its index rise to 49.8 from 48.3 in February. In contrast, the manufacturing PMI index fell to a five-month low of 41.6 in March, indicating a concerning rate of contraction in the sector. Despite these challenges, overall business confidence improved, reaching its highest level in nearly a year. However, the latest data showed a slight decline in employment, despite the more optimistic outlook.
