Eurozone economic growth stalled in April, with a stagnating services sector undermining a surprise rebound in manufacturing.
While easing inflation has raised hopes for a potential European Central Bank (ECB) rate cut in June, weak demand and declining confidence cast a shadow over the region’s economic outlook.
According to the S&P Global Purchasing Managers’ Index (PMI), the eurozone saw minimal growth in April, with the PMI rising slightly to 50.1—just above the neutral 50-mark that indicates growth. This slight increase, revised from an initial 49.7, highlights an economy struggling to build on the modest progress made in the first quarter.
The disparity between sectors was at the heart of the economic slowdown. Manufacturing output surged at its fastest pace in over two years, driven by improvements in supply chains and a rebound in industrial activity. However, the services sector, which is a major pillar of the eurozone economy, barely expanded. The Services PMI fell to 50.1 from 51.0 in March, marking its weakest reading since late 2024. This suggests a slowdown in demand across key sectors like tourism, hospitality, and business services.
Further highlighting the region’s struggles, new business orders declined for the eleventh consecutive month, with a slightly faster rate of decline compared to March. Both goods producers and service providers reported weaker sales, continuing a trend of soft demand that has dampened growth since mid-2023.
France remained a major concern, as its composite PMI signaled contraction for the eighth consecutive month. Political uncertainty and economic stagnation have plagued the country, contrasting with better performances in Spain, Italy, and Germany. According to experts, “Spain is leading the pack in terms of growth, followed by Italy, then Germany with marginal growth, and France trailing behind.” They expect Germany to soon surpass Italy, buoyed by a substantial fiscal package, while France is likely to continue lagging.
Employment across the bloc showed some positive signs, with job growth in services offsetting declines in manufacturing. However, businesses appear cautious about expanding their workforces, reflecting broader economic uncertainty.
Business sentiment also took a hit, with expectations for the year ahead falling to their lowest levels in nearly two and a half years. This marked the fourth consecutive monthly decline, underscoring how soft demand and geopolitical uncertainty are weighing on confidence.
In equity markets, eurozone stocks pulled back following a strong recent performance. The Euro STOXX 50 index fell 1%, while Germany’s DAX dropped 0.7% and France’s CAC 40 fell 0.5%.
Some industrial giants, including Airbus, Siemens, and BASF, saw their shares fall by around 2%, while Carrefour and UniCredit outperformed, each rising by 0.8%. Earnings reports also added volatility, with Continental shares rising nearly 2% after reporting its strongest sales in four years, while Danish wind turbine maker Vestas surged 4% after returning to profitability in Q1. However, Philips dropped 1% after cutting its full-year margin outlook.
