Eurozone Services Sentiment Inches Down

The index measuring services confidence in the Euro Area rebounded to 2.2 from the upwardly revised, five-year low of 1.4 in the previous month, ahead of the market consensus that it would fall further to 0.2. Still, it was the second lowest reading in the five-year period, underscoring the impact of high energy prices faced by firms due to the halt of oil and gas supply from the Middle East. The current assessment of business situations eased its pessimism (-0.9 vs -2.4 in April), and the expected drop in employment also eased (-1.8 vs -4.9). Still, the evolution of demand worsened (2.6 vs 3.2). Signs energy prices may have already peaked supported the evolution of demand expected in the upcoming three months (4.9 vs 3.4), consistent with a drop in selling price expectations (16.2 vs 17.3).

The index measuring services confidence in the Euro Area sank to 0.9 points in April of 2026 from 4.1 in the previous month, firmly below market expectations of 3.5 to reflect the least optimistic sentiment since April of 2021. The assessment of business situation fell deeper (-3.4 vs -1.4 in March) and expectations on demand growth sank (3 vs 7.8), consistent with lower purchasing powers from surging energy costs following the outbreak of war in the Middle East. Consequently, expectations on employment (-5.1 vs -0.3) and inflation (17.4 vs 14.9) both worsened.

The index measuring services confidence in the Euro Area inched down by 0.1 point from the previous month to 4.9 in March of 2026, the lowest since October of last year, but ahead of market expectations of 3.9. The result was in line with other leading indicators in the period showing that businesses are less optimistic about the economy following the outbreak of war in the Middle East, which triggered a surge in European energy prices. Still, sentiment gauges have not retreated to the extent feared as attempts to undercut higher borrowing costs raised activity in the near term.