Financial News: German Private Sector Falls Back Into Contraction

German Private Sector Falls Back Into Contraction

(RTTNews) - Germany's private sector fell into the contraction territory in April as trade tariff concerns damped business confidence and demand, flash purchasing managers' survey by S&P Global revealed Wednesday.

The composite output index fell to 49.7 in April from 51.3 in March. The score fell below the 50.0 no-change mark for the first time in four months.

The renewed contraction was led by the service sector, which shrank for the first time since last November. Meanwhile, manufacturing production expanded for the second consecutive month.

The services Purchasing Managers' Index fell to a 14-month low of 48.8 from 50.9 a month ago. At the same time, the factory PMI registered 48.0 compared to 48.3 in March.

The lower intakes of new work in the service sector contrasted with slight growth in manufacturing orders.

While service providers cited concerns about tariffs and delay in decision making amid worries about political and economic outlook, manufacturers said export sales grew for the first time in over three years.

Business confidence declined to the lowest level in six months as service providers reported the sharpest fall in sentiment since September 2023. The decline in employment extended to an eleventh straight month in April. Staffing levels declined in the manufacturing sector, while there was a sustained job creation in the service sector.

Backlogs of work declined in April, in a sign of a general lack of pressure on business capacity across the private sector.

Turning to prices, the survey showed a slight uptick in the rate of inflation in average prices charged for goods and services. The factory gate charges increased for the first time in almost two years. At the same time, the rise in services output charges was the weakest since last October.

The rate of input cost inflation across manufacturing and service sectors combined eased to a five-month low in April.

The US tariff policy has not caused a major slump in manufacturing just yet, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

Manufacturing production increased in April as they hope of reaching some compromises with the US and also Germany's 90 percent of exports go to countries other than the US, de la Rubia noted.

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