The eurozone economy showed no real growth in April, as trade tensions pushed services into contraction.
The Composite PMI dropped from 50.9 in March to 50.1 in April, falling short of expectations.
This level barely stayed above the 50 threshold, indicating stagnation across the region’s private sector.
While manufacturing improved slightly, services shrank for the first time in five months.
The Services PMI fell to 49.7, down from 51, while manufacturing rose to 48.7, beating forecasts.
Surveys recorded collapsing business sentiment across the eurozone, reaching its lowest point since November 2022.
Companies in nearly every member state expressed growing uncertainty and declining confidence.
Rising global tensions and tariff fears weakened investment and hiring plans across both sectors.
Germany Holds Ground While France Slumps
Germany’s economic activity reversed after three months of growth.
The country’s Composite PMI dropped from 51.3 to 49.7 in April.
Services suffered most, with the index plunging from 50.9 to 48.8.
Firms blamed tariffs and uncertain outlooks for delayed decisions and weaker demand.
Despite this, manufacturers raised output and recorded improved margins due to lower input costs.
Export orders in Germany rose, while producers gained pricing power for the first time in months.
Falling energy prices and a weaker euro helped support factory output.
Dr. Cyrus de la Rubia from Hamburg Commercial Bank said manufacturers “surprised on the upside.”
He pointed to Trump’s new 10% and 25% tariffs, saying producers “increased output instead of collapsing.”
German firms boosted production for a second straight month, growing faster than in March.
France showed a much bleaker picture.
The French Composite PMI declined from 48 to 47.3, missing expectations.
Services shrank sharply, falling to 46.8, while manufacturing steadied at 48.2.
Economist Jonas Feldhusen warned that France’s private sector faces mounting pressure in the coming months.
He reported collapsing demand, especially in domestic orders, and shrinking service employment.
Feldhusen said political instability and rising debt add to the risks for France’s economy.
Cooling Prices Give ECB Room to Cut Rates
Inflationary pressure eased across the bloc, providing slight relief for the European Central Bank.
Input costs rose at the slowest pace since November 2024, while output prices hit a five-month low.
De la Rubia noted, “The ECB gains support for its rate-cutting agenda from falling service-sector costs.”
Still, he warned that tight margins remain a concern for many firms.
Feldhusen predicted broader price relief in the coming months, especially if inventories rise.
“Trade tensions could leave more goods unsold, pushing prices lower,” he explained.
Both economists expect the ECB to cut interest rates at least three more times this year.
Looking ahead, they see fiscal support as a potential growth driver.
De la Rubia cited higher defence spending and German infrastructure plans as key positives.
“These investments should help lift both manufacturing and services—though not immediately,” he added.