German services contract in April at fastest pace in over three years, PMI shows

Reuters Wed, May 6, 2026 at 3:58 PM GMT+8 2 min read

BERLIN, May 6 (Reuters) - Germany's service sector contracted at its steepest rate in more than three years in April as demand evaporated due to rising ‌inflationary pressures and uncertainty linked to the Iran war, a survey showed ‌on Wednesday.

The final HCOB Germany Services Purchasing Managers' Index, compiled by S&P Global, fell to 46.9 in April ​from March's 50.9 and was in line with the preliminary reading.

April also marks the first time since August 2025 that the indicator fell below the 50 mark. A reading below 50 signals contraction, while one above 50 signifies growth.

It was also the fastest rate of decline ‌since November 2022.

Firms pointed to ⁠the effects of the war and ongoing uncertainty for the dip in new business, which fell for a second month in a row ⁠and at its sharpest rate since January 2024.

Unlike the manufacturing sector, which has been somewhat buffered by stockbuilding efforts, the services sector has felt the conflict's immediate impacts on demand, said ​Phil ​Smith, economics associate director at S&P Global Market ​Intelligence.

The final S&P Global composite PMI, ‌which includes services as well as manufacturing, fell to 48.4 in April from 51.9 the month before, bringing it into contraction territory for the first time in nearly a year.

"The chances of the German economy contracting in the second quarter have now risen," Smith said, adding that services firms are increasingly nervous about the outlook due to higher inflation ‌and a squeeze on spending power across the ​economy.

Service providers cut jobs for a fourth consecutive month, ​with the pace of job-shedding ​quickening slightly from March, while backlogs of work also fell at the ‌fastest rate in eight months, pointing to ​underused capacity.

Price pressures ​have also intensified, leading to output price inflation jumping to a 26-month high as firms pass on higher costs to customers.

"After refraining from stronger price increases in ​March, which perhaps reflected initial ‌hopes that the conflict and any associated disruption would be short-lived, services ​firms have started to be more aggressive with their price setting," Smith said.

(Reporting ​by Miranda Murray; Editing by Joe Bavier)

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