A contraction in Germany's services sector eased somewhat in October, but high energy costs, uncertainty and rising interest rates weighed on the outlook, a survey showed on Friday.
S&P Global's final services Purchasing Managers' Index (PMI) for October rose to 46.5 from 45.0 the previous month. The reading was higher than a flash estimate of 44.9.
A reading below 50 indicates a contraction in activity.
The slight easing in the rate of decline in services activity was a positive development, said Phil Smith, economic associate director at S&P Global. However, he said "there was no relief for services firms on the cost front, with the rate of input price inflation even accelerating anew amid reports of increased energy bills, growing wage demands and higher financing costs."
The input price subindex was at its highest since June.
The responses to the survey showed firms did not expect the situation to improve over the coming year, with more companies predicting a fall in activity than a rise.
The German composite PMI index, which comprises both the services and manufacturing sectors, fell to 45.1 from 45.7 in September, though it was higher than a flash October reading of 44.1.
The sustained declines in both the manufacturing and services sectors show that "a contraction of the German economy in the fourth quarter looks inevitable," said Smith.
Germany staved off the threat of recession in the third quarter with unexpected growth but remains in choppy waters amid high inflation driven by a painful energy standoff with Russia. (Reporting by Miranda Murray; Editing by Susan Fenton)