Euro Area Private Sector Slide Eases

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.

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.