Eurozone Private Sector Contracts Most in 17 Months

The S&P Global Eurozone Composite PMI came in at 52.0 in August 2026, broadly in line with the preliminary estimate of 52.1 and little changed from July’s eight-month high. The latest data point to another solid quarter of growth in Q3, supported by improving industrial activity and a recovery in services following the initial impact of the surge in energy prices at the start of the Middle East conflict. New orders increased at the same solid pace as in July, while new export orders rose for the first time in four and a half years. Employment also expanded for the first time this year, although backlogs continued to decline at a slower pace. Inflationary pressures were broadly stable, with input costs easing slightly while output prices rose at the same pace as in July. However, price pressures remained elevated by historical standards. Business confidence was unchanged.

The Eurozone flash composite PMI rose to 52.1 in August 2026 from 52 in July, reaching a nine-month high and exceeding expectations of 51.7. Growth was supported by a stronger manufacturing performance, with factory output increasing at its fastest pace in four and a half years. Germany was a major contributor, recording its strongest manufacturing expansion since January 2022. New orders also increased, while export demand returned to growth for the first time in four and a half years, suggesting an improvement in external demand. Companies responded to the stronger activity by increasing employment, providing further evidence of resilience in the regional economy. At the same time, price pressures showed signs of easing, pointing to a gradual moderation in inflationary pressures. However, business confidence weakened during the month and remained relatively subdued, highlighting continued uncertainty over the economic outlook despite the stronger activity data.

The S&P Global Eurozone Composite PMI was revised higher to 52 in July 2026 from a preliminary estimate of 51.9 and 50 in June, moving back into expansion territory for the first time since March and signalling the strongest increase in business activity in eight months. The improvement was broad-based, with renewed growth in the services sector accompanied by a sustained and faster expansion in manufacturing output. Demand also strengthened, as new business increased for the first time since earlier this year and at the fastest pace since November, pointing to a solid start to the third quarter. Meanwhile, inflationary pressures continued to ease, with both input cost and output price inflation slowing further in July. Business confidence improved to its highest level in five months, reflecting growing optimism about the economic outlook.