Germany's Service Sector Activity Contracts for the First Time in 9 Months

Forex - Germany's service sector experienced a decline in commercial activities in November for the first time in nine months, as the deterioration of demand conditions continued to break the sector's resilience. At the same time, there was a further reduction in service employment as firms reacted to decreasing capacity utilization and rising cost pressures. This also contributed to an increase in output price inflation. The HCOB final services Purchasing Managers' Index fell to 49.3 in November from 51.6 in October, dipping below the 50-point threshold that separates growth from contraction. The German economy is grappling with weak demand, intense competition from abroad, and political uncertainty following last month's budget discussions that led to the collapse of the country's three-party coalition. Early elections are set to be held in February. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated, "After eight months of growth, the services PMI has fallen into negative territory. This means that it can no longer compensate for the stagnation in the industrial sector, and the economy could stagnate or even contract in the fourth quarter." The composite PMI index covering both the service and manufacturing sectors decreased from 48.6 in October to 47.2 in November. The report emphasized that the decline in new orders continued, with firms indicating reduced demand from the public sector and manufacturers. New export orders contracted for the fifth consecutive month, although at a slower pace than in October. While the rate of layoffs in the service sector has slightly decreased, employment has dropped for five consecutive months, marking the longest streak since 2009.