Preliminary data released by Destatis, the German Federal Statistical Office, paints a concerning picture of Germany’s service sector performance in July 2025. While nominal revenues show a modest increase compared to July 2024, adjusted for inflation (real terms), the sector has experienced a contraction, raising questions about the robustness of Germany’s economic recovery and the effectiveness of current government policies.
The data reveals a 0.3% real decline and a 0.4% nominal decrease in service sector revenue compared to June 2025. While the 1.3% nominal increase year-on-year might superficially appear positive, the underlying real decline of 0.2% signals potential headwinds and suggests a less sustainable growth trajectory. The discrepancy between nominal and real figures underscores the persistent impact of inflation, eroding purchasing power and impacting service consumption.
The sharpest real revenue falls were concentrated in key sectors. “Freelance, scientific and technical services” suffered a significant 1.9% drop, indicating a worrying slowdown in innovation-driven activities. Falling revenues in property and housing, alongside transportation and warehousing, at 1.0% and 0.5% respectively, suggest broader strains within the construction and logistics industries. These sectors are typically sensitive to broader economic confidence and investment levels.
Conversely, the Information and Communication Technology (ICT) sector demonstrated resilience, with a 1.3% real-term increase. Growth in “other economic services” encompassing areas like equipment rentals and labour recruitment, was comparatively modest at 0.3%. This uneven performance highlights the divergence of economic activity across different industries, raising questions about the structural health of the German economy.
Critics are already pointing to potential policy failures, arguing that government initiatives aimed at stimulating growth have failed to adequately support the broader service sector. The slow pace of reforms aimed at reducing bureaucratic burdens and fostering a more favorable environment for small and medium-sized enterprises (SMEs), which are vital to the service sector, are also facing renewed scrutiny. The data arguably reflects a deeper fragility within the German economy, one that requires more targeted and robust policy interventions to ensure a sustainable recovery and address long-term structural vulnerabilities. Future monitoring of these evolving trends will be critical to assessing the long-term health of the German economy.