Growth softened further from October's recent high due to sluggishness in underlying demand, with inflows of new business stagnating in the final month of 2025. Firms' expectations for growth in the year ahead meanwhile slumped to their lowest in eight months.

Despite the slowdown in the pace of expansion, inflationary pressures picked up. Alongside faster increases in both operating expenses and prices charged in the service sector, manufacturers recorded a first increase in input costs in almost three years amid signs of growing supply-chain pressures.

The HCOB Flash Germany Composite PMI Output Index registered 51.5 in December, down from 52.4 in November and its lowest reading in four months. At the broad sector level, the rate of expansion in service sector business activity eased to its weakest since September, albeit still registering close to its long-run average (index at 52.6 in December).

In manufacturing, however, production levels returned to contraction territory (index at 49.4), to end to a nine-month sequence of growth.

Total inflows of new business were unchanged in December compared with the month before, after having risen in both October and November.

Output levels were supported to some extent by work on backlogged orders, which fell for the second month running in December following a brief uptick at the start of the fourth quarter.

Concerns about the health of the economy, the unsettled geopolitical environment and the competitiveness of German companies weighed on business confidence in December.

On the labour market front, December's flash data indicated a slight reduction in employment across the German private sector, thereby extending the current sequence of decline to 19 months.

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