Germany's business activity grew at its quickest pace in ten months this March, driven by the first increase in manufacturing production in nearly two years, according to the latest HCOB Flash PMI survey. However, the service sector struggled, with growth nearly stalling due to weak demand.
Employment continued to decline, reflecting low capacity utilization, though job cuts slowed as business optimism slightly improved. Inflationary pressures eased, with input costs and output prices rising at their slowest rate since last October.
The HCOB Composite PMI rose to 50.9 in March from 50.4 in February, marking the highest level since May 2024. While manufacturing saw its strongest growth in three years (52.1), the service sector barely expanded (50.2).
Rising domestic demand boosted manufacturing orders for the first time since March 2022, though export orders remained weak. Meanwhile, new business in services saw its sharpest decline in over a year due to market uncertainty. Overall, backlogs of work continued to shrink, and employment declined for the tenth consecutive month, though at a slower pace. Inflation cooled, particularly in services, while manufacturing costs showed only modest changes. Business confidence improved slightly, supported by expectations of increased infrastructure spending and a broader economic recovery, despite ongoing concerns over tariffs and uncertainty.