German services sector activity stabilises, PMI survey shows

BERLIN (Reuters) - Business activity in Germany's services sector stabilised in March, ending a five-month sequence of contractions in activity, a survey showed on Thursday.

The HCOB final services Purchasing Managers' Index (PMI) rose to 50.1 in March from 48.3 in February, just above the 50.0 mark that separates growth from contraction.

"Overall, the services sector is playing a stabilizing role in the broader economy," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. "However, it is unlikely to be sufficient to avert another quarter of declining GDP at the start of this year."

Firms in the services sector are growing increasingly optimistic about the outlook, with business expectations reaching their highest level since February 2022, before Russia's invasion of Ukraine.

There was also sustained job creation among service providers amid reports of strategic hiring, the report said.

"It is evident that companies are operating under the assumption that future workloads will justify the current staff expansion," de la Rubia said.

Wage pressures continued to drive up businesses' costs, but the rates of inflation in both input prices and output charges slowed noticeably from the month before.

The composite PMI index, which comprises services and manufacturing, climbed to a four-month high of 47.7 in March from February's 46.3.

The rise in the index was driven mainly by the stabilisation in services activity and to a lesser extent by a slower fall in manufacturing output, the report said.

(Reporting by Maria Martinez; Editing by Hugh Lawson)

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