Germany's service sector contracted for the second consecutive month in May 2025, shrinking at the fastest pace in two and a half years, according to the latest HCOB PMI data. The headline Services PMI fell to 47.1, down from 49.0 in April, driven by persistent weak demand and heightened uncertainty among customers. New business inflows declined for the ninth straight month, with foreign orders dropping sharply. The HCOB Germany Composite PMI Output Index, which combines manufacturing and services, slipped to 48.5 in May from 50.1 in April, marking the first contraction since December last year. Manufacturing production growth slowed while the services sector's decline accelerated. Employment growth in services slowed to its weakest in the current five-month streak, while backlogs of work continued to fall. Price pressures eased slightly but remained above pre-pandemic averages, mainly due to wage increases. Chief Economist at Hamburg Commercial Bank Cyrus de la Rubia said the slowdown was likely temporary, with rising real wages, lower interest rates, and expansionary fiscal policies expected to support a recovery. Attribution: Amwal Al Ghad English Subediting: M. S. Salama
