Eurozone business activity stabilized in June as the downturn in the services sector eased and manufacturing continued to expand. The final S&P Global Eurozone Composite PMI Output Index rose to 50.0 from 48.5 in May, a three-month high that marked the end of two consecutive months of declining output. Meanwhile, the Services PMI Business Activity Index improved to 49.4 from 47.7, also a three-month high, although it remained just below the 50 threshold separating expansion from contraction.
According to S&P Global Chief Business Economist Chris Williamson, the improvement reflects a sharp easing in inflationary pressures following the collapse in energy prices after the US-Iran ceasefire. Input cost inflation in the services sector fell at its fastest pace since the survey began in 1998, excluding only the extraordinary declines seen during the COVID-19 lockdowns. The moderation in costs helped revive activity in sectors hit hardest by the Middle East conflict, particularly leisure and tourism, while business confidence strengthened to its highest level since the war began as firms anticipated further improvement in demand.
The survey reinforces the view that the worst of the energy-driven slowdown may be over, but it also strengthens the case for policy patience at the European Central Bank. Williamson noted that the near-unprecedented easing in cost pressures is likely to soften some of the more hawkish views within the Governing Council, reducing the need for additional rate hikes in the near term. With inflation cooling more rapidly and growth beginning to stabilize, policymakers now have greater scope to pause and assess how quickly price pressures continue to fade during the second half of the year.
| Indicator | Previous | Latest |
|---|---|---|
| Composite PMI Output | 48.5 | 50.0 |
| Services PMI Business Activity | 47.7 | 49.4 |
