German business activity returns to growth after four months, PMI shows
Germany's private sector returned to growth in July for the first time in four months, driven by a strong rebound in manufacturing that exceeded economists' expectations.
According to the latest S&P Global Flash Purchasing Managers' Index (PMI), Germany's Composite PMI climbed to 51.2 in July from 49.5 in June, moving back above the 50-point mark that separates growth from contraction. The reading also beat analysts' forecasts of 49.8, signaling a stronger-than-expected improvement in business activity.
Manufacturing led the recovery, with the sector's PMI rising to 52.2, its strongest level in more than four years. New manufacturing orders increased significantly, helping offset weakness in other parts of the economy. Meanwhile, the services sector remained below the growth threshold with a PMI of 49.6, although it improved to its highest level in four months. New business across the private sector also expanded for the first time since February.
The survey showed that business confidence has risen to a five-month high, while the pace of job losses slowed to its weakest level since December. The improved outlook suggests companies are becoming more optimistic about future demand after months of sluggish economic performance.
Despite the encouraging data, economists warned that the recovery could still face challenges. Rising oil prices, renewed conflict in the Middle East and increasing input costs—including the end of Germany's temporary fuel tax reduction—could place fresh pressure on businesses in the coming months. While the latest figures offer hope that Europe's largest economy is regaining momentum, analysts say sustained growth will depend on how these geopolitical and inflationary risks develop.