Euro Area Services Sector Growth Nearly Stalls

The S&P Global Flash Eurozone Services PMI fell to 50.1 in March 2026 from 51.9 in February, below forecasts of 51.1. The reading pointed to near-stalling growth in the services sector, the weakest since a contraction in May last year. There was a renewed reduction in new orders, alongside a marked increase in price pressures due to the war in the Middle East. Meanwhile, services employment increased marginally, but to the smallest extent since last September.

The HCOB Eurozone Services PMI inched higher to 51.9 in February of 2026 from 51.6 in the previous month, slightly ahead of the preliminary estimate of 51.8 and in line with the initial market expectations. New orders for companies in the sector improved at a faster pace, although strong demand was solely due to favorable domestic dynamics as export orders fell further, extending the streak that began in June of 2023. Likewise, service providers continued to clear backlogs to sustain output levels, although the pace of depletion slowed to its slowest in three months. In the meantime, firms continued their net hiring pace to stretch the current trend of job creation to five years. On the price front, input cost inflation was unchanged from the prior month's 11-month high, but output charges slowed. Still, the pickup in orders was enough to carry an improvement in business confidence for the upcoming 12 months.

The HCOB Eurozone Services PMI rose to 51.8 in February 2026 from 51.6 in January, a two-month high, signaling continued but modest expansion in the services sector. Markets were expecting a slightly higher reading of 51.9. Growth was supported by ongoing activity gains, although new business increased at a slower pace, pointing to softer demand momentum. Employment levels were unchanged, ending a five-year streak of job creation as firms paused hiring. Cost pressures eased slightly, with input prices rising at a slower rate than in January, while output price inflation in the services sector also moderated. Despite the softer trends in orders and pricing, service providers remained confident that activity will increase over the next 12 months, though optimism edged slightly lower compared with January.