The euro area’s private sector showed little momentum in June, with business activity expanding only marginally for the sixth month in a row, according to flash PMI data from S&P Global. The HCOB composite output index held steady at 50.2, barely above the 50.0 threshold that separates growth from contraction.
This continued stagnation underscores the fragility of the region’s recovery. Growth remains narrowly supported by manufacturing, while the services sector—a key pillar of the bloc’s economy—has yet to show meaningful improvement. In June, services activity stabilized at the neutral 50.0 mark, up slightly from 49.7 in May but still reflecting flat performance.
Manufacturing output rose for the fourth consecutive month, though the overall PMI stayed at 49.4, below the growth threshold and short of expectations. The latest reduction in new business was the slowest in the current 13-month decline, with export orders weakening at the mildest pace since April 2022.
Employment levels grew slightly, matching May’s pace, while input cost inflation eased to its lowest since November. Selling price inflation ticked up modestly. Notably, business sentiment improved, reaching its highest level since January.
Hamburg Commercial Bank Chief Economist Cyrus de la Rubia (Credit: HCOB)
Germany Sees Uptick, France Slips Further
The eurozone’s largest economy, Germany, showed tentative signs of improvement. The HCOB composite index rose to 50.4 in June from 48.5 in May, signaling a modest return to growth led by manufacturing. Factory output climbed, with the manufacturing PMI reaching a 34-month high of 49.0, up from 48.3.
However, services in Germany continued to contract, offsetting some of the gains. Still, analysts see this as a potential turning point for the bloc’s industrial engine.
In contrast, France extended its downward trend. The composite output index dropped to 48.5 from 49.3, marking a full ten months of declining private sector activity. Both manufacturing and services sectors worsened. The services PMI fell to 48.7, while the manufacturing PMI unexpectedly dropped to 47.8—a four-month low.
Hamburg Commercial Bank Chief Economist Cyrus de la Rubia noted, “The eurozone economy is struggling to gain momentum. For six months now, growth has been minimal, with activity in the service sector stagnating and manufacturing output rising only moderately. In Germany, there are signs of a cautious improvement in the situation, but France continues to drag its feet.“
He added that while the outlook is improving, the robust Q1 GDP growth of 0.6% is unlikely to be repeated in Q2.
