Euro Area Services Sector Shrinks in April

The S&P Global Eurozone Services PMI was revised up slightly to 47.6 in April 2026 from 47.4, but still fell from 50.2 in March, marking its first move into contraction in nearly a year and the sharpest decline in activity since February 2021. Demand weakened further, with new orders falling at the fastest pace since October 2023, partly due to a drop in export business. Employment was broadly unchanged for a second consecutive month, a notable shift from the strong hiring trend seen in previous years. Backlogs were reduced at the quickest pace since March 2025, suggesting firms are working through existing orders. Meanwhile, cost pressures intensified, with input and output price inflation rising to multi-year highs. Business confidence also deteriorated, dropping to its lowest level in 42 months.

The S&P Global Eurozone Services PMI eased to 50.2 in March 2026 from 51.9 in February and close to the preliminary 50.1 estimate, marking the weakest performance since May last year. Demand conditions deteriorated, with new business falling for the first time since July 2025 and at the fastest pace in 16 months, while export sales also declined more sharply. Service providers continued to work through backlogs, extending a trend seen since November, and employment levels were broadly unchanged, with hiring activity near a five-year low. Business confidence weakened notably, dropping to a ten-month low amid rising uncertainty. At the same time, cost pressures intensified, with input price inflation accelerating to a 34-month high, although the pace of increase in prices charged slowed slightly compared to February.

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.