FX.co ★ Germany's Private Sector Activity Returns to Contraction

The HCOB Flash Composite PMI for Germany dropped to 48.6 in May 2025, descending from 50.1 in April, and falling significantly short of the anticipated 50.4. This reading signals a return to contraction for the private sector, after enjoying modest growth over the preceding four months. The downturn was primarily attributable to a more pronounced decline in the services sector, which fell for the second consecutive month and at its quickest rate in two and a half years, registering at 47.2 compared to the previous 49, due to continuously weakening demand. Conversely, the manufacturing sector contracted at a reduced rate, recording 48.8 against 48.4, with production increasing for the third consecutive month and new export orders rising at their fastest pace since early 2022. Employment experienced a minor decline. Regarding pricing dynamics, the rate of increase in average prices for goods and services was at its lowest since October of the previous year, and input price inflation remained consistent with April's six-month low. Lastly, there was a slight improvement in business expectations.