The Eurozone is in decline. Business activity suffers its sharpest contraction in 17 months. Rising prices and disruptions to travel and supplies are causing concern, as they threaten to worsen the slowdown.
The Eurozone economy has contracted for the first time in nearly a year and a half. Final data for the April PMI “confirm the early signs of an economy heading toward decline, as the war in the Middle East slows the recovery that had been taking shape before the conflict erupted.”
S&P Global Market Intelligence notes that, “although so far only a modest quarterly decline in GDP of 0.1% is observed, the absence of signs that the crisis will subside soon suggests that the slowdown could worsen rapidly.”
The seasonally adjusted composite PMI for total activity in the eurozone fell below the 50-point neutral level, which separates growth from contraction, for the first time in nearly a year and a half in April.
Specifically, it declined from 50.7 in March to 48.8 in April, reaching its lowest level since November 2024. Overall, this reading indicated a modest contraction in private-sector business activity.
As they explain, so far, the services sector has been the hardest hit, “as consumer-oriented businesses are under particular pressure amid the twin crises of soaring energy prices and travel disruptions.” However, although the manufacturing sector has shown resilience so far, “this is due to stockpiling, as companies fear further price hikes and supply constraints.”
“This will not only slow growth in the manufacturing economy in the coming months as stockpiling winds down, but will also have a domino effect on service sector firms that rely on manufactured inputs—especially food and, of course, refined fuels—if these additional supply and price concerns materialize,” they assert.
At the composite level, the decline in business activity fully reflected the contraction in the services sector, which was the sharpest in more than five years and more than offset a stronger increase in manufacturing output. This situation was also evident in total new orders, which fell for the second consecutive month in April and at the sharpest rate since November 2024.
