- 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.”