BERLIN, Feb 4 (Reuters) - The upturn in business activity in Germany's service sector carried on into the new year, though the pace of growth eased to its slowest in four months, a survey showed on Wednesday.
The final HCOB Germany Services Purchasing Managers' Index fell to 52.4 in January from 52.7 in December, nearly a full point lower than an initial reading of 53.3 but still above the 50.0 mark signalling growth.
"Without the service sector, Germany's economy would look in an even worse state
than it is currently portrayed in the ongoing debate," said Hamburg Commercial Bank chief economist Cyrus de la Rubia, adding that continued growth can be expected in the coming months thanks to increases in new business.
Inflows of new business grew for the fourth consecutive month, driven by a notable increase in new export business, which hit its fastest pace since May 2023.
However, the rate of growth in new business was modest, reflecting only gradual improvement in demand conditions.
Despite improved demand and optimism about future business conditions, sector employment dipped to the same level seen in September 2025, which marked the fastest fall since mid-2020.
Firms reported redundancies and unfilled vacancies, with some citing difficulties in finding suitable staff.
"We do not see this development as the beginning of a trend, although it cannot be ruled out that many companies are considering strategies for boosting productivity," said de la Rubia, describing the sharp decline as "somewhat surprising".
Input costs surged, driven by higher labour expenses, including a significant increase in the minimum wage, and rising energy prices. This led to the steepest rise in output prices in 11 months, as service providers passed on costs to customers.
The final HCOB composite PMI, which includes manufacturing and services, rose to a slightly downwardly revised 52.1 in January from 51.3 in December, buoyed by a renewed upturn in manufacturing output.
(Reporting by Miranda Murray; Editing by Joe Bavier)
