Markit's final composite Purchasing Managers' Index (PMI), tracking the activity in manufacturing and services that together account for more than two-thirds of the economy, rose to a five-month high of 55.2 in December from 55.0 in November.
The reading was well above the 50 line that separates growth from contraction and came in better than a preliminary estimate of 54.8 that was published last month.
The main driver for the acceleration was, as previously reported, strong growth in manufacturing, which reached a 35-month high in December. Business activity for services eased in the last month of 2016 to 54.3 from November's reading of 55.1.
"Though losing some growth momentum since November's high, Germany's service sector finished the year in good shape," said Markit economist Philip Leake. "Business activity rose solidly, driven by another robust increase in new orders."
Services continued to hire new staff to cope with rising workloads and existing backlogs.
The German economy grew 0.7 percent in the first quarter and 0.4 in the second. It is expected to rebound in the fourth quarter after growth halved to 0.2 percent in the third. Markit forecasts Europe's largest economy will grow 1.9 percent in 2016, Leake said.
"Ongoing activity growth at German service providers was accompanied by an accelerated upturn at manufacturers," he said. "As a result, growth of private sector output picked up slightly
to a five-month high. With services expectations also improving in December, the outlook for 2017 is bright."
