Eurozone Economic Activity Falls Unexpectedly

(MENAFN) Business activity across the euro area unexpectedly declined in April for the first time since late 2024, as a steep contraction in the services sector outweighed continued stability in manufacturing, according to survey findings released on Thursday.

The HCOB Flash Eurozone Composite Purchasing Managers’ Index, produced by S&P Global, dropped to 48.6 in April from 50.7 in March. This move pushed the index below the 50-point mark that separates expansion from contraction and came in under market forecasts of 50.1.

The figures suggest increasing strain on the region’s economy, with rising energy prices and supply chain disruptions tied to the Middle East conflict reducing demand and weakening business confidence.

S&P Global reported that the downturn was primarily driven by the services industry, while manufacturing remained comparatively steady in several of the euro area’s largest economies.
Chris Williamson, chief business economist at S&P Global Market Intelligence, stated that the eurozone is experiencing growing economic pressure linked to the ongoing conflict. He also cautioned that supply shortages are becoming more widespread, which could further limit growth while adding upward pressure on prices in the near term.

The weaker-than-expected survey results are expected to deepen concerns at the European Central Bank, which is already dealing with inflation levels above its 2% target. Although policymakers are likely to keep interest rates unchanged at their upcoming meeting, financial markets are anticipating two rate increases by the end of the year.

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