- Composite PMI 49.9 vs 50.0 prelim
The resurgence in virus cases and tighter restrictions weighed on new business and overall activity in December, leading to a contraction in the services sector. Growth expectations did improve, reflecting optimism for later this year but present activity will see some moderation amid omicron risks. Besides that, price pressures remain elevated with the rate of input and output cost inflation being the second-fastest on record. Markit notes that:
"Although less stringent than during previous waves of the pandemic, the restrictions in place in December, combined with heightened anxiety and disruption caused by high numbers of infections, were enough to push business activity across Germany's service sector back into decline.
"The fall in activity was only modest, but with additional restrictions having come into effect since the December survey and the Omicron variant looming large, there are further downside risks to activity in January.
"Nevertheless, we saw services firms' confidence towards the year-ahead outlook improve in December, reflecting expectations that activity levels will inevitably start to normalise once infections and restrictions ease, and hopes that the pandemic will pose less of a threat to the economy this time next year.
"If the resurgence in the pandemic wasn't enough, sharply rising costs have further piled pressure on businesses. The rate of input price service sector inflation ticked down in December, but it stayed close to November's record high and could see fresh impetus from the renewed surge in energy prices that came at the tail-end of last year."
