An increase in business activity was reported in Germany's private sector in March, marking the fastest growth in ten months and the first production increase in manufacturing in almost two years. The HCOB German flash composite Purchasing Managers' Index, compiled by S&P Global, rose to 50.9 in March, surpassing February's 50.4 and exceeding the growth threshold of 50.0.

Analysts had predicted a reading of 51.0. Economist Cyrus de la Rubia of Hamburg Commercial Bank noted the positive outlook for economic growth in the first quarter, supported by the composite PMI consistently remaining above the expansion threshold.

Germany recently approved plans for increased spending to stimulate growth in the country and boost military capabilities. This fiscal initiative is expected to contribute to a more sustained recovery starting in the first quarter.

While the manufacturing sector improved to 48.3 from 46.5, moving out of contraction territory and surpassing expectations, the services sector experienced a slight setback, with the business activity index dropping to 50.2 from 51.1 but still showing growth.

Inflation pressures decreased as input costs and output prices rose at a slower pace, according to the survey data. Notably, manufacturers increased production for the first time in almost two years, attributed to an increase in U.S. imports and anticipated benefits from Germany's new infrastructure and defense measures.