Eurozone Growth Slows in March as War and Inflation Bite

The S&P Global Eurozone Composite PMI was revised up slightly to 50.7 in March 2026 (from a flash estimate of 50.5), but remained below February’s 51.9, signaling the weakest private-sector expansion since June 2025. The slowdown reflects a mix of soaring energy prices, disrupted supply chains, financial market turbulence, and slumping demand, all exacerbated by the Middle East war. Service sector activity stagnated, while manufacturing output held firm. However, new orders fell, with export demand weakening further, and backlogs of work shrank at the slowest pace since October 2025. Employment cuts accelerated to a 13-month high, as businesses faced mounting pressures. On the inflation front, input costs surged to a three-year peak, and output price inflation hit its highest level since February 2024. Meanwhile, business confidence slumped to its lowest in almost a year.

The S&P Global Eurozone Composite PMI declined to 50.5 in March 2026, down from 51.9 in February and below market expectations of 51.0, according to preliminary data. This signals only marginal growth in the bloc’s private sector, the weakest in ten months, as service sector activity nearly stalled. New orders contracted for the first time in eight months, and employment continued to fall amid rising uncertainty tied to the Middle East conflict. On the price front, input cost inflation surged to its fastest pace since February 2023, while output prices rose at the sharpest rate since February 2024. Supply chains also faced severe disruptions, with suppliers’ delivery times lengthening the most in over three-and-a-half years. Finally, business confidence plummeted to its lowest in nearly a year, marking the steepest drop since Russia’s invasion of Ukraine in 2022.

The HCOB Eurozone Composite PMI climbed to 51.9 in February 2026, up from 51.3 in January, marking the strongest expansion in private sector activity in three months. The reading signaled a firmer pace of growth across the euro area economy. Growth was driven by stronger manufacturing and services output, with Germany leading the upturn. Ireland and Italy also posted solid gains, while growth slowed in Spain and France stagnated. New orders increased at a faster pace overall, despite a continued decline in export business. Employment levels were broadly stable, showing little change from the previous month. On the price front, input cost inflation accelerated for the fourth consecutive month, reaching its highest level in nearly three years. Output price inflation eased slightly but remained elevated, marking the second-steepest increase in the past year. Meanwhile, business confidence improved, rising to its strongest level since May 2024.