German Service Sector Shows Strong Growth Amid Rising Costs

Hamburg Commercial Bank's Chief Economist, Cyrus de la Rubia, commented on Germany's PMI data, noting that the service sector experienced robust growth in February. According to Jin10, the acceleration in new business growth, supported by large orders and a significant increase in overseas business, bodes well for continued expansion in the service sector. The backlog of orders, which had been declining for three consecutive months, also saw a rebound in February. However, businesses are attempting to manage the improved operating conditions with fewer employees, indicating a need for more certainty before resuming hiring. Costs in the service sector continue to rise rapidly, driven by wage increases as well as higher energy and transportation costs. Companies have only been able to pass on a small portion of these increased costs to customers. Despite the pressure on profits, de la Rubia does not foresee a trend emerging from this situation, particularly as optimism about future business activity remains high, with only a slight decline.