German business activity surged to its highest level in more than two years in October, PMI data showed

Germany’s private sector recorded its strongest growth in almost two and a half years in October, supported by a strong increase in services activity, a survey showed on Friday.

The German HCOB preliminary composite Purchasing Managers’ Index, compiled by S&P Global, rose to 53.8 in October from 52.0 in September, marking the fastest growth since May 2023 and topping analysts’ expectations of 51.5.

October marked the fifth consecutive month that the composite index, which tracks the services and manufacturing sectors that account for more than two-thirds of the euro zone’s largest economy, has been above 50, indicating growth.

Services led the sharpest rise in business activity in more than two years, with the same index rising to 54.5 in October from 51.5 in September.

“This was an unexpectedly good start to the last quarter,” said Hamburg Commercial Bank chief economist Cyrus de la Rubia, also indicating that manufacturing output increased for the eighth month in a row, although at a slower pace than in September.

However, the manufacturing PMI remained in contraction territory although it increased slightly to 49.6 in October from 49.5, beating expectations that it would remain stable.

“These are good conditions for growth in the fourth quarter,” he said.

“However, the fact that the outlook for the future is more cautious than in previous months, both among service providers and industry, shows that the economic situation remains fragile,” de la Rubia added.

Business expectations for next year have weakened, with concerns about a weakening domestic economy, geopolitical tensions and high costs clouding the outlook, according to the survey.

Private sector employment continued to decline, albeit at a slower pace, with October marking the 17th month of cuts, the longest such period since the 2008-10 financial crisis.
Source: Reuters