BERLIN (Reuters) -Germany’s services sector recorded its fastest growth in eight months in September, despite a decline in new work and a notable reduction in employment, a survey showed on Friday.
The final HCOB Germany services PMI rose to 51.5 in September, slightly below an initial reading of 52.5 but still in expansion territory after a reading of 49.3 in August.
Coming in above the 50.0 mark signals expansion, while a reading below that figure indicates a drop in overall activity.
The renewed expansion in services, along with stronger manufacturing output growth, helped push the HCOB final composite PMI that tracks both sectors to 52.0, a 16-month high.
While the figures may at first seem encouraging, there are some downsides that indicate private sector output will not rise sustainably in the coming months unless demand improves, said Hamburg Commercial Bank chief economist Cyrus de la Rubia.
“In the manufacturing sector, new orders fell in September, ending a three-month growth streak. And in the service sector, new business has shrunk again,” said de la Rubia.
Employment in the service sector shrank for a second month in a row in September, which saw its steepest decline in more than five years due to dwindling backlogs of work and sustained weakness in demand.
The consecutive slump does not necessarily herald a phase of job cuts, but it is worth keeping an eye on due to increasing discussions about whether artificial intelligence is making jobs redundant on a significant scale, said de la Rubia.
However, despite these challenges, service providers remained optimistic about the year-ahead outlook, with business expectations reaching their highest level since May 2024.
(Reporting by Miranda Murray)
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