Eurozone Business Activity Posts Modest Growth in March

The S&P Global Eurozone Composite PMI was revised higher to 48.5 in May 2026 from a preliminary of 47.5 and compared to 48.8 in April, signaling the faster contraction in 18 months in private sector activity as inflation weighs. It also marked back-to-back months of contraction for the first time since the end of 2024, with overall activity levels being pulled lower by services (47.7 vs 47.6) while manufacturing continued to rise (51.6 vs 52.2). Weighing on output levels was a further fall in demand for Euro Area goods and services, with export markets a particular drag as non-domestic new orders sank at the quickest rate in five months. Signs of softening were also apparent in the labour market as job losses picked up. As for pricing trends, input cost pressures remained the sharpest seen since late-2022. For a third month in succession, the rate of output price inflation quickened. Positively, there was a modest recovery of business confidence.

The S&P Global Eurozone Composite PMI fell to 47.5 in May of 2026 from 48.8 in the previous month, firmly below market expectations of 48.8 to reflect the sharpest pace of decline in private-sector activity since October of 2023. Activity was weighed by a decline in services (46.4 vs 47.6 in April), the fastest in over five years, to underscore the impact of higher prices triggered by the war in Iran since March. In turn, manufacturing maintained its robust streak despite a slowdown (51 vs 52.3). New business at the aggregate level dropped sharply from the previous month with both sectors noting declines, driving firms to reduce their outstanding business levels to their lowest since late 2024. Input costs rose the most in three years, driving firms to raise charges by a similar magnitude and thus reducing client's purchasing power. Consequently, companies reduced their staffing levels for a fifth straight month, seen in both sectors. Likewise business sentiment deteriorated further.

The S&P Global Eurozone Composite PMI fell to 48.8 in April of 2026 from 50.7 in the previous month, revised marginally higher from the preliminary estimate of 48.6 but remaining firmly below the initial market expectations of 50.2. It marked the first contraction in the EA private-sector activity in 16 months, reflecting a somewhat delayed impact on the services sector (47.6 vs 50.2 in March) from the war in Iran as higher energy costs weighed on consumer demand, enough to offset higher activity for manufacturers (52.3 vs 52). The contrast was consistent with swings for new orders and contracts, which contracted for services but expanded for goods producers. Private-sector employment dropped slightly, but the fall was contrastingly led by manufacturers. Input cost inflation at the aggregate surged to a 40-month high due to the increase in energy costs from the war in the Middle East, driving both sectors to increase their output charges. Consistently, business confidence deteriorated.