The HCOB Eurozone Composite PMI edged down to 50.1 in April 2025 from 50.9 in March, according to a flash estimate, falling slightly short of market forecasts of 50.3. Despite the modest decline, the reading marks the fourth consecutive month of expansion in private sector activity, signaling that the region is still narrowly avoiding a downturn. However, underlying data suggest growing fragility across key sectors.
Euro area economic activity nearly stagnates
Service sector activity unexpectedly slipped into contraction territory for the first time since December, falling to 49.7 from 51.0 the previous month, while the manufacturing PMI held at 48.7 — a marginal improvement from March's 48.6 but still deep in contraction for the 27th straight month. While manufacturers noted slower declines in output, both sectors continued to struggle with demand.
New orders shrank for the eleventh month in a row, with businesses in both manufacturing and services pointing to a lack of client confidence and weaker global demand. The persistent uncertainty stemming from the U.S.'s increasingly aggressive trade stance — including tariff threats against major trading partners — has led many firms to reassess or abandon established supply chains, adding to the drag on production and planning.
Employment levels mostly flat
Employment levels across the Eurozone remained largely unchanged, with firms reporting stagnant hiring amid dwindling backlogs of work and elevated cost pressures. This labor market stagnation signals that companies are reluctant to commit to new hires without clearer signs of demand recovery.
On the inflation front, the pace of input cost inflation eased to a five-month low, helping to moderate output price growth. Firms cited slightly more stable raw material costs and easing energy prices, although geopolitical uncertainty and shipping delays continue to pose upside risks.
Looking ahead, business sentiment remained subdued, with confidence across both sectors sinking to its lowest level in over two years. Persistent worries over global trade policy, inflation volatility, and the slow recovery in consumer spending continue to weigh on expectations for future output, suggesting that even the modest growth observed in recent months may be difficult to sustain without policy support or a rebound in global demand.
