BERLIN, Aug 23 Reuters German business activity contracted at the fastest pace for more than three years in August, a preliminary survey showed on Wednesday.

The HCOB German Flash Composite Purchasing Managers39; Index PMI, compiled by SP Global, fell to 44.7 from July39;s 48.5, hitting its lowest since May 2020 and confounding analysts39; expectations for a reading of 48.3.

The indicator was below the 50 level denoting growth in activity for the second consecutive month.

The composite PMI index tracks the services and manufacturing sectors, which together account for more than twothirds of Germany39;s economy. A deepening downturn in manufacturing output was accompanied by a renewed contraction in services activity.

Any hope that the service sector might rescue the German economy has evaporated, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. Instead, the service sector is about to join the recession in manufacturing, which looks to have started in the second quarter.

Business activity in the services sector contracted for the first time in eight months. The sector reading fell to 47.3 from 52.3, marking a ninemonth low.

The manufacturing PMI rose to 39.1 in August from 38.8 in July but remained deeply in contraction territory, the survey showed.

Businesses remained pessimistic about the outlook as rising interest rates, customer uncertainty and high inflation continued to weigh on demand for goods and services, the survey showed.

There was…