Eurozone Services Activity Revised Higher

The Eurozone Services PMI Business Activity Index rose to 49.4 in June of 2026 from 47.7 in the previous month, revised higher from the preliminary estimate of 48.9 and well above the earlier market expectations of 48.5. It was the softest downturn in the bloc's services sector activity since the outbreak of war in the Middle East triggered an energy shock for European importers. New business volumes fell at a slightly faster pace than the previous month. Consequently, companies cleared backlogs of work at an accelerated take for output. Despite the pullback in demand from clients, firms recorded a fresh increase in their headcounts after the brief pullback in the second quarter. The hiring was in line with an improvement in business sentiment as energy prices fell from their peaks and reduced the surge in borrowing costs. Input inflation faced by the sector fell for the first time since October of last year.

The Eurozone Services PMI Business Activity Index improved to 48.9 in June 2026, the highest level in three months and above market expectations of 48.5, compared with 47.7 in May. The data pointed to a slower decline in services activity, with business conditions showing signs of stabilisation. New business continued to fall, but the pace of contraction eased, while input price growth weakened and output price inflation also slowed during the month. Employment trends improved, with services companies recording a renewed, although marginal, increase in staffing levels. Business confidence strengthened, suggesting improved expectations for future activity. Most responses included in the June flash PMI survey were collected before the June 17 signing of the memorandum of understanding between the US and Iran to halt hostilities, meaning the latest improvement does not fully reflect the potential impact of easing geopolitical tensions.

The S&P Global Eurozone Services PMI inched higher to 47.7 in May of 2026 from the five-year low of 47.6 in the previous month, revised sharply higher from the preliminary estimate of 46.4 to align with the earlier market expectations. New business inflows continued to decline, consistent with the lower purchasing power for clients since the outbreak of war in the Middle East triggered a surge in energy costs. Despite the sharp increase in input costs, output charges rose at a softer pace. Consequently, firms tapped their backlogs to soften the drop in output. The lower need for capacity drove employment levels in the services sector to drop for the first time since January of 2021. Looking ahead, business confidence improved slightly from the previous month but remained below historical averages.