LONDON (Reuters) -Euro zone business growth has stalled this month, a survey showed on Wednesday, with activity in the bloc’s dominant services industry contracting and the prolonged downturn in manufacturing continuing.
HCOB’s preliminary composite euro zone Purchasing Managers’ Index, compiled by S&P Global, dropped to 50.1 this month from March’s 50.9. It was barely above the 50 mark separating growth from contraction and short of the median estimate for 50.3 in a Reuters poll.
“The service sector has turned into a bit of a party pooper,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“Activity has shrunk instead of growing, which it had been doing almost continuously since February 2024. This has pushed the whole economy into stagnation territory.”
A PMI covering services sank to 49.7 from 51.0, missing the poll estimate for a more modest decline to 50.5.
Optimism among services firms plummeted with the business outlook index falling to 53.1 from 57.8, the lowest since mid-2020 when the COVID-19 pandemic was tightening its grip on the world.
Manufacturing activity, in decline for nearly three years, saw some improvement. The sector’s PMI rose to a 27-month high of 48.7 from 48.6, confounding expectations in the Reuters poll for a decline to 47.5.
An index measuring output, which feeds into the composite PMI, jumped to 51.2 from 50.5, its highest in almost three years.
“Manufacturing seems to be holding up better than expected. Despite the U.S. introducing general tariffs of 10% and car tariffs of 25% at the start of April, most manufacturers in the euro zone are not too fazed,” de la Rubia said.
“Instead of falling off a cliff, they’ve actually increased production for the second month in a row, and even more robustly than in March.”
Firms have suffered from uncertainty as U.S. President Donald Trump flip-flops on his tariff policy.
But some of the activity was from factories completing past orders. The backlogs of work index dropped to a three-month low of 46.8 from 47.7.
As overall demand fell again, firms returned to reducing headcount. The composite employment index dipped to 49.9 after being just above breakeven at 50.4 in March.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
Comments