Germany's Service Sector Contracts in November

BERLIN (Reuters) – Germany's service sector contracted in November for the first time in nine months as demand conditions continued to deteriorate, a survey showed on Wednesday.

The HCOB final services Purchasing Managers' Index fell to 49.3 in November from 51.6 in October, moving below the 50-point threshold that separates growth from contraction.

Germany's economy has been dogged by weak demand, intensifying competition from abroad and political uncertainty after a budget row brought down the country's three-way coalition last month. Snap elections will be held in February.

> "After eight months of growth, the PMI for services dipped into negative territory," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.
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> "This means it can't make up for the recession in the industrial sector anymore, and the economy might stagnate or even contract in the fourth quarter," he added.

A composite PMI index, which comprises services and manufacturing, fell to 47.2 in November from 48.6 in October.

The report highlighted a continued decline in new business, with firms citing reduced enquiries from the public sector and manufacturers. New export business shrank for the fifth consecutive month, albeit at a slower pace than in October.

The rate of job cuts in the service sector eased slightly, though employment has now declined for five consecutive months – the longest stretch since 2009.

Cost pressures picked up, driven by rising wages, pushing up output price inflation to its highest since April.