Germany’s private sector activity contracted at its fastest pace in 18 months during June, raising fresh concerns about the health of Europe’s largest economy.

According to the latest Purchasing Managers’ Index (PMI) data, business activity declined for a third consecutive month as companies struggled with weaker demand and slowing new orders.

The figures suggest that Germany may have slipped back into economic contraction during the second quarter of the year.

The services sector experienced the sharpest slowdown, with businesses reporting fewer customer orders and reduced activity levels.

Manufacturing remained relatively stable but failed to provide enough momentum to offset weakness elsewhere in the economy.

New business orders also declined for a fourth straight month, reflecting cautious spending by consumers and businesses alike.

Many companies continue to face challenges linked to high financing costs, subdued consumer confidence and uncertainty surrounding global economic growth.

Business leaders are increasingly calling for measures that could stimulate investment and support economic activity.

Despite the slowdown, there was some encouraging news on inflation. Input costs and output price inflation both eased during June, suggesting that pricing pressures across the economy may be gradually moderating.

This could provide some relief for policymakers and businesses alike.

Economists say Germany’s performance will remain closely watched because of its importance to the wider European economy.

Any sustained weakness could have implications for trade, investment and business confidence across the continent.

Source: Reuters