- Composite PMI 53.8 vs 54.3 prelim
The reading reaffirms a return back to growth for the services sector after a more disappointing December reading, amid the spread of the omicron variant in Germany. Employment conditions remain solid so that is a positive takeaway but input cost inflation jumped once again, nearing the record high from November. Markit notes that:
"The German service sector managed to avoid a further contraction in January, despite rising COVID cases linked to the Omicron variant and ongoing pandemic restrictions.
"Alongside decent growth in business-to-business services and in the finance sector, the survey data indicated a reduced drag from face-to-face services such as hotels & restaurants as activity here showed signs of bottomingout.
"Overall, the increase in services activity was only modest, but it marks a step in the right direction and adds to promising signs from the manufacturing sector at the start of the year, to raise hopes of the economy avoiding a technical recession after contracting in the final quarter of 2021.
"Some risks remain, however. Even with no further tightening of restrictions, rising COVID cases have the potential to disrupt activity if enough of the workforce has to isolate. On top of this, purchasing power continues to come under pressure from sharply rising prices, with rates of inflation remaining close to record highs.
"Despite the challenges at hand, businesses remain strongly optimistic about the outlook for activity, which not least is helping to maintain a strong labour market recovery.”
