• Composite PMI 49.9 vs 49.7 prelim

The final readings reaffirm a marginal growth in Germany's services sector - the first in seven months - while overall business activity also improved to near flat levels in January. The drop in new business did ease and both input cost and output price inflation retreated slightly further from their record highs. S&P Global notes that:

"A slight rise in services activity in January indicates that the German economy has started the year on a more stable footing and reduces the chances of a technical recession (i.e. consecutive quarterly falls in output), after GDP contracted in the three months to December.

"Recession or no recession, demand remains under pressure from high prices and tightening financial conditions. A further decrease in service sector new business indicated that January's upturn in activity was largely supported by catch-up effects as firms worked through backlogs, and that a pick-up in demand is needed for sustained growth. Businesses' optimism towards growth prospects has increased, though expectations remain lower than the pre-pandemic average.

"A solid and accelerated rise in service sector employment in January underscores the continued resilience of the German labour market and reassuringly shows limited spillover from the recent slowdown in workplace activity.

"However, firms' willingness to continue hiring staff is giving power to employees when it comes to wage demands, which the survey shows is helping drive a continued sharp rise in service sector business costs. Services output price inflation is likewise showing a degree of stickiness, signalling a risk that core inflation could stay higher for longer."