The eurozone economy showed signs of stabilization in June, as manufacturing output continued to grow and the services sector's contraction moderated. The S&P Global Eurozone Manufacturing PMI came in at 51.4, slightly below May's 51.6 but still above the 50-point expansion threshold, marking the fifth straight month of growth in the sector.
This performance completed the strongest calendar quarter for euro area manufacturing production since early 2022, according to the survey. The resilience in manufacturing helped offset recent weakness in services activity, contributing to an overall steadier economic picture after two months of declining output.
Services contraction eases, cost pressures cool
The services sector continued to shrink in June, but the pace of contraction slowed compared with previous months. At the same time, cost pressures in the service industry declined at the sharpest rate on record outside the pandemic-era lockdowns, providing relief to businesses and supporting demand.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the combination of improving services activity and sustained manufacturing growth suggested the eurozone economy had stabilized. He highlighted that a key drag on growth since the outbreak of the Middle East conflict—the energy price spike subduing consumer demand—showed signs of cooling markedly in June.
Manufacturing details: output up, orders soft
Manufacturing output growth accelerated from May's four-month low, but new orders increased only marginally. Employment continued to decline, and supplier capacity remained under pressure amid ongoing geopolitical tensions. Both input and output cost inflation eased from recent multi-year highs, while business confidence improved to its highest level in four months.
The headline PMI is a weighted average of new orders (30%), output (25%), employment (20%), suppliers' delivery times (15%), and stocks of purchases (10%). A reading above 50 signals expansion compared with the prior month.
Broader context
The eurozone's economic stabilization comes as the UK GDP rose 0.6% in Q1 2026, led by services, though household income dropped. Meanwhile, the dollar held firm near 101 as hawkish Fed bets rose, and oil prices eased for a third straight day on Thursday after Qatar indicated progress in U.S.-Iran talks regarding the Strait of Hormuz.
The softer inflation data may reduce expectations of near-term interest rate hikes by the European Central Bank, as policymakers weigh the balance between supporting growth and controlling price pressures.
This article is for informational purposes only and does not constitute financial advice.
