Eurozone Growth Slows in March as War and Inflation Bite

The S&P Global Eurozone Composite PMI rose to 51.9 in July 2026 from 50.0 in June, well above market expectations of 50.3, a preliminary estimate showed. The reading signaled the first expansion in business activity in four months, supported by a renewed expansion in services and the fastest increase in manufacturing output since March 2022. Germany grew for the first time in four months, while France's downturn eased to a marginal contraction. Elsewhere, the rest of the eurozone recorded its strongest expansion in eight months. New orders rose at the fastest pace since April 2023, while export orders posted their smallest decline since March 2022. Employment increased for the first time this year, supply-chain pressures eased, allowing manufacturers to rebuild input inventories for the first time in three-and-a-half years, and both input cost and output price inflation moderated. Business confidence also improved to a five-month high, although it remained below pre-conflict levels.

The S&P Global Eurozone Composite PMI was revised up to 50.0 in June 2026, from a preliminary 49.5 and above May’s 48.5, marking a stabilization in private sector output after two months of decline. Manufacturing production growth offset a slower but continued drop in services activity. Italy, Spain, and Ireland drove the recovery with sharper expansions in business activity, while Germany and France, though still in contraction, saw their rates of decline ease. New business volumes fell for a fourth month, but the contraction was marginal and the joint-slowest since March. Employment remained virtually unchanged after the steepest drop in five and a half years, and backlogs depleted at a slightly slower pace than in April and May, though still among the fastest of the past year. Input and output costs rose sharply but at a slower rate than recent peaks, while business confidence reached its highest level since the outbreak of war in the Middle East.

The S&P Global Flash Eurozone Composite PMI increased to 49.5 in June 2026 from 48.5 in May, compared to forecasts of 49.1. It is the highest reading in three months, pointing to a smaller contraction in private sector activity. The services drop also eased (47.7 vs 48.9) while manufacturing output growth slowed to a five-month low (51.2 vs 51.3). There was a sustained fall in new orders and a slight drop in employment. Meanwhile, there were signs of inflationary pressures softening, with input costs rising at the slowest pace since the outbreak of war in the Middle East and output charges increasing at the weakest rate in three months. Manufacturers continued to signal sharply lengthened suppliers' delivery times, while the recent spell of rising purchasing activity came to an end. In addition, business confidence ticked up for the second month running.