German service sector growth decelerates for second consecutive month in January

German services sector growth slows down for the second consecutive month in January. The final seasonally adjusted Markit Germany Services PMI Business Activity Index dropped to 53.4 in January from 54.3 in December. It indicated towards a strong growth but a slowdown from the previous month and was below the average over 2016 as a whole. Surveyed companies attributed larger activity to new business gains, although there were reports of subdued demand in certain cases.

The final Markit Germany Composite Output Index fell a bit to a four-month low of 54.8 in January. This is more than the flash estimate of 54.7, but below December’s print on 55.2. This hinted a marginal slowdown in private sector output growth, with a subdued increase in services activity partly countered by a sharper rise in manufacturing production.

New orders grew at the slowest pace in four months in January. Certain respondents attributed the deceleration on loss of major clients. However, the rate of growth was stronger than the average since the series started nearly 20 years ago. Meanwhile, the pace of job creation quickened to a three-month high. Moreover, the latest increase was more rapid than the trend over the current 39-month sequence of jobs growth.

In spite of the rising price pressures and the recent deceleration in activity growth, German service providers were the most positive since January 2016. More than 29 percent of panellists project output to increase in the coming 12 months, with new client wins and a general economic upturn set to stimulate activity. However, political uncertainty was a drag on confidence at certain firms.