Eurozone PMI: Economy Stays Out of Recession as Services Recover

The Eurozone economy showed further signs of stabilization in June, with the Flash Composite PMI Output Index rising from 48.5 to 49.5, its highest level in three months. While the reading remained just below the 50 threshold that separates expansion from contraction, it pointed to a significant easing in the downturn. Services activity improved notably, with the Services PMI Business Activity Index climbing from 47.7 to 48.9, also a three-month high, helping offset a modest slowdown in manufacturing where the PMI slipped from 51.6 to 51.3 and output edged down from 51.3 to 51.2.

According to S&P Global’s Chris Williamson, the latest survey suggests the Eurozone is “showing enough resilience to just about stay out of recession.” The data are broadly consistent with flat GDP growth in the second quarter. Encouragingly, service-sector demand improved as tourism and leisure-related industries began recovering from disruptions caused by the Middle East conflict. Manufacturing activity, meanwhile, continued to benefit from inventory building as firms sought to secure supplies and guard against potential price increases linked to the war.

There were also tentative signs that inflation pressures may be easing. Williamson noted that lower energy prices are already feeding through to businesses, helping reduce both input cost and selling price inflation. While supply-chain delays continued to push costs higher and support precautionary inventory accumulation, concerns about future shortages appeared less acute than in previous months. Together, the findings suggest the Eurozone economy remains fragile but may be emerging from the worst effects of the recent energy and supply shock, with lower oil prices offering an increasingly important source of support.

Full Eurozone PMI flash release here.