Germany's Private Sector Hits 11-Month High as Services Finally Rejoin Manufacturing in Recovery

According to S&P Global and HCOB Flash PMI data for Germany (September 23, 2026), Germany's private sector picked up more steam in September, with the Composite PMI climbing to 53.8 from 51.8 in August — the strongest reading since October 2025 and well above the expansion threshold of 50. The surprise came from the services sector, which jumped to 52.9 after forecasters had expected another contraction, following months of subdued performance since the Iran war outbreak in February.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, described the September data as pointing to the strongest rise in business activity for almost a year. He noted that the service sector had finally rejoined manufacturing in growth territory after the quieter period that followed the onset of the Middle East war. Manufacturing itself held firm at 53.8, down slightly from August's four-year high of 54.3 but still signalling solid expansion.

The demand picture also improved significantly. Rising inflows of new work were recorded for a third consecutive month and at the greatest extent since February 2022 — a figure that underscores the breadth and durability of the demand recovery, not just its existence. As new work accumulated faster than businesses could process it, backlogs of unfinished work built up — the quickest accumulation since May 2022 — which in turn prompted an increase in staffing levels for a second consecutive month. Employment growing for a second straight month is a notable milestone after the extended period of job losses that preceded the current cycle.

Inflationary pressures increased in September, linked in large part to the rising price of fuel. This is the shadow side of Germany's September PMI story: even as the business activity recovery broadens, the energy cost environment is creating upward pressure on output prices that will complicate both corporate margin management and the European Central Bank's monetary policy deliberations. Phil Smith's comment that the data does not change much for the ECB — which continues to focus more on inflation than on activity — is a reminder that the policy backdrop for Germany's recovery remains complex.

For international businesses selling into Germany, the September PMI data represents the most encouraging composite picture in nearly a year. Services businesses — which had been the consistent weak point throughout 2026 — are now growing again, suggesting that the recovery is becoming more broadly based and less dependent on the government-procurement and export-driven manufacturing surge that characterised the earlier phase of the upturn. Companies targeting Germany's professional services, hospitality, transport, and consumer services sectors should note that September's PMI marks a genuine inflection point in demand conditions — even if the energy cost overhang means that margin recovery will lag revenue recovery.