German business activity slowed notably this month as growth in the services sector decelerated and a slump in manufacturing deepened, a preliminary survey showed on Friday.
The HCOB German Flash Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 50.8 in June from 53.9 in May, below analysts' expectations for a reading of 53.5.
Although the indicator was above the 50 level that marks growth in activity, the latest reading signalled a sharp slowdown in the rate of expansion to a four-month low.
The index tracks the services and manufacturing sectors, which together account for more than two-thirds of Germany's economy. There was a combination of a slower rise in service sector business activity and a deepening downturn in manufacturing output, the report showed.
The services sector grew, but at a slower pace than in previous months, with the services PMI reading falling to 54.1 in June from 57.2 in May.
"The German economy is supported by the services sector, which according to the HCOB PMI expanded quite strongly throughout the second quarter, although the pace of growth slowed somewhat in June," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
However, in manufacturing, all signs point to a contraction in the second quarter, he added.
The manufacturing PMI fell to 41.0 in June from 43.2 in May, marking a 37-month low.
There was a further weakening of confidence in the outlook for business, with expectations falling for the fourth month running to their lowest in 2023 so far, the survey showed.
