German services sector growth slows as demand remains subdued, PMI shows

BERLIN (Reuters) - Business activity in Germany's services sector grew for the third consecutive month in February, but the pace of expansion slowed due to subdued demand, S&P Global reported on Wednesday.

The final and seasonally adjusted HCOB index for business activity in the services sector stood at 51.1 in February, down from 52.5 in January. While a reading above 50 indicates growth, the drop suggests there was only a marginal increase in activity.

New orders fell again as tight budgets and production cuts among manufacturing clients weighed on demand. This marked the sixth consecutive month of declining orders, though the rate of decline was the smallest in the current contraction phase, partly due to a less pronounced drop in export orders.

Service providers focused on clearing backlogs, with the pace of backlog reduction accelerating to its fastest since mid-2020.

Employment growth continued for the second month, but at a slower rate than in January, with some firms citing strategic hires, particularly in sales.

Overall, business sentiment for the year ahead was less optimistic than in January, with the forward-looking index falling below its long-term trend.

Some respondents expressed hope for an economic upturn following the formation of a new government, but high prices and a skilled labour shortage remained concerns.

(Reporting by Reuters; Editing by Hugh Lawson)

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