German Private Sector Downturn Eases On Cooling Inflation, Lower Recession Fears

Germany's private sector downturn softened to a stable footing at the start of the year amid a moderation in price pressures along with a renewed positive outlook on reducing recession risks and ongoing strength in the job market, flash survey data from S&P Global showed on Tuesday.

The flash composite output index rose to a seven-month high of 49.7 in January from 49.0 in December. The index was forecast to rise slightly to 49.6.

However, any reading below 50 indicates contraction in the sector.

The improvement in the composite index mainly relied on the service sector, which returned to growth for the first time in seven months. Meanwhile, the factory activity continued its declining trend in January.

The services Purchasing Managers' Index, or PMI, climbed to a 7-month high of 50.4 in January from 49.2 in the prior month. The score was forecast to increase to 49.6.

The manufacturing PMI dropped to a two-month low of 47.0 from 47.1 in December. The expected score was 47.9.

Read more: German Economy Roughly Stagnated In Q4: Bundesbank

The German private sector still remained in contraction territory on account of lower demand due to multiple headwinds like steep inflation, tightening financial conditions, and investment reticence, as well as investment reticence in manufacturing. However, the overall fall in new orders was the weakest in seven months.