Eurozone private sector activity growth at seven-month high

The HCOB Eurozone Composite PMI rose to 50.9 in March 2025, exceeding both the preliminary estimate of 50.4 and February’s final reading of 50.2. This marked the third consecutive month of expansion in the bloc’s private sector and the strongest growth since last August, though the overall pace remained subdued.

Eurozone private sector activity growth at seven-month high

A key driver of this improvement was the return to growth in the manufacturing sector, as goods production expanded for the first time in two years, signaling a potential turnaround after prolonged weakness. Meanwhile, the services sector also saw stronger activity, accelerating slightly from February’s pace. However, new business inflows remained largely stagnant, suggesting demand conditions were still fragile. Employment posted its first increase since July 2024, with businesses adding workers amid cautious optimism about the economic outlook. Still, firms remained wary, as business sentiment weakened to its lowest level since December 2024, reflecting persistent concerns over geopolitical tensions, high borrowing costs, and sluggish demand across key markets.

Input cost inflation and output charge increases moderate

On the pricing front, input cost inflation and output charge increases both moderated to three-month lows, offering some relief to consumers and businesses. The easing of price pressures could bolster expectations for future European Central Bank policy decisions, with markets increasingly pricing in potential rate cuts later in the year. However, uncertainty over the broader economic trajectory continues to weigh on confidence, with businesses closely monitoring trade policy developments and financial market conditions.