Germany's private sector recorded its strongest growth for almost two-and-a-half years at the start of the fourth quarter, driven in large part by a solid increase in services business activity.

The upturn in output was supported by a renewed expansion in intakes of new work, while employment came close to stabilising as backlogs showed their first rise since mid-2022.

Latest data did, however, show a broad-based easing of businesses expectations for the year ahead. With growth strengthening and demand improving, inflationary pressures rose. There were faster increases in both input costs and average charges for goods and services, with the respective rates of inflation reaching the quickest for eight months.

The HCOB Flash Germany Composite PMI Output Index rose from 52.0 in September to 53.8 in October, signalling a further acceleration in the pace of growth to the quickest since May 2023. Output has risen for five successive months, the longest sequence of expansion since the first half of 2023.

The stronger performance at the start of the fourth quarter reflected the sharpest increase in service sector business activity for almost two-and-a-half years. Manufacturing production rose for the eighth month running, albeit at a weaker rate than in September and one that dipped below the long-run series trend.

Growth of total activity was supported by a renewed increase in new business volumes in October, following slight declines in both August and September.

Firms reported higher backlogs of work for the first time since July 2022 in October. Employment fell for the seventeenth month running, the longest sequence of decline since that which ran from October 2008 to February 2010.

German private sector companies remained confident of growth in activity over the next 12 months. That said, overall business expectations eased further below the long-run average to the weakest since April.

Powered by Commodity Insights