Business activity in Germany expanded at its fastest pace in 16 months in September, supported by a rebound in services, a survey showed on Tuesday. However, persistent weakness in manufacturing and softer demand suggest the momentum may prove short-lived.

The HCOB German flash composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 52.4 in September from 50.5 in August, surpassing analysts' forecasts of 50.6. This marked the fourth consecutive month above the 50-point threshold that separates growth from contraction.

The upswing was driven largely by the services sector, where the PMI climbed to 52.5, up sharply from 49.3 in August and reaching an eight-month high. By contrast, manufacturing slipped deeper into contraction, with its index falling to 48.5 from 49.8, the lowest in four months.

The survey also pointed to fragile demand, with new business inflows declining in both sectors. At the same time, inflationary pressures reemerged: input costs and output charges rose at their fastest pace in several months, particularly within services.

"Trouble seems to be brewing in manufacturing," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. "If demand, both at home and abroad, keeps dropping, it won't be long before firms hit the brakes on production, too."

He added that weakening orders across sectors signal the risk of another slowdown ahead. Business expectations for the year have also softened, reflecting concerns over sluggish growth prospects and elevated operating costs.