German services sector activity rose in February for the second consecutive month, demand recovered and optimism rose, a survey showed on Friday.
S&P Global's final services Purchasing Managers' Index (PMI) rose to 50.9 in February from 50.7 in January, remaining above the 50.0 threshold that separates growth from contraction.
"After contracting markedly in the final quarter of last year, the service sector has made an encouraging start to 2023," said Phil Smith, economic associate director at S&P Global, though it remains to be seen whether this is enough to prevent a second consecutive quarterly fall in GDP and therefore a technical recession, he added.
Firms saw demand pick up slightly during the month and were more optimistic about the outlook, the survey showed.
"A degree of confidence has returned to the economy due to the easing of energy-price and recession concerns, which has helped support demand," Smith said.
On the price front, latest data showed that the rate of output charge inflation eased to a 12-month low but was still historically elevated.
"Inflation continues to run high, with a particular degree of stickiness in the service sector, where costs and selling prices are still rising at some of the quickest rates on record due in part to growing pressure from wage demands," Smith said.
The German composite PMI index, which comprises both the services and manufacturing sectors, rose to 50.7 in February from 49.9 in January, pointing to a slight increase in business activity across the Germany private sector, which ends a seven-month sequence of contraction. (Reporting by Maria Martinez; Editing by Toby Chopra)
