According to a survey released on Wednesday, restrictions to contain the coronavirus dampened activity in Germany's services sector in December, and concerns about the Omicron variant clouded the outlook for January.

The latest Purchasing Managers' Index (PMI) for services from IHS Markit revealed that activity had dropped to 48.7 from 52.7 in November. The reading was a bit higher than a flash estimate of 48.4%.

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The composite PMI index, which includes both services and manufacturing, dropped to 49.9 in December from 52.2 in November. The reading was lower than the 50.0 flash figure.

"The drop in activity was relatively modest," said Phil Smith, associate economics director at IHS Markit. "However, with further restrictions having come into effect since the December survey and the Omicron variant looming large, there are even more downside risks to activity in January," he said.

"However, we saw services firms' confidence in the year ahead outlook improve in December, reflecting expectations that activity levels will inevitably begin to normalise once infections and restrictions ease, as well as hopes that the pandemic will pose less of a threat to the economy by this time next year."