Eurozone Services Sentiment Improves as Expected

The index measuring services sector confidence in the Eurozone rebounded to 3.2 in June of 2026 from 2.6 in the previous month, the highest since March, and slightly ahead of market expectations of 3. Expectations on the evolution of demand improved to 7.3 from 5.4 in May, supported by expectations of softer cost inflation as energy prices fell from their peaks on signs of restored supply from the Middle East. Consistently, selling price expectations dropped 14.1 from 16, and the uncertainty gauge fell to 15.3 from 16.5. The improvement in overall sentiment was supported solely by expectations of a better macroeconomic backdrop, as the evolution of demand (3.0 vs 2.9) and business situation (-0.6 vs -0.6) in the last three months were loosely unchanged.

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.