Eurozone private sector activity expands for fourth month

The HCOB Eurozone Composite PMI edged down to 50.4 in April 2025 from 50.9 in March, though it was revised upward from the preliminary reading of 50.1 and came in slightly above market expectations of 50.3.

Eurozone private sector activity expands for fourth month

Despite the modest slowdown, the reading marked the fourth consecutive month of expansion in private sector activity across the euro area, offering tentative signs of resilience amid an increasingly challenging global economic backdrop. The latest data showed that the services sector continued to be the primary engine of growth, registering a reading of 50.1. While this was a step down from March’s 51, it narrowly avoided slipping into contraction territory and defied earlier forecasts that anticipated a sharper pullback. Meanwhile, the manufacturing sector remained in contraction but showed a slight improvement, with its PMI rising to 49 from 48.6, reflecting a softer pace of decline. Notably, despite the subdued demand environment, manufacturing output managed to expand slightly—suggesting that firms may be working through backlogs or anticipating a potential recovery later in the year.

New order inflows remain under pressure

New order inflows, however, remained under pressure, falling for the eleventh consecutive month. Businesses across both services and manufacturing cited a persistent drag from weak global demand and escalating trade tensions—particularly the ongoing tariff disputes between the United States, China, and the European Union—as key factors dampening new business pipelines. The protracted uncertainty continues to weigh on investment sentiment and client confidence, both within the euro area and among external trading partners. Nonetheless, labor market conditions remained relatively stable. Firms continued to hire across the bloc, encouraged by modest activity growth and the need to maintain capacity amid hopes for a stronger second half of the year. On the inflation front, input cost pressures eased to their weakest level in five months, supported by lower raw material and energy prices, while output charge inflation—what businesses charge customers—rose at the slowest pace seen so far this year. These developments may provide some relief to the European Central Bank as it navigates the final stages of its tightening cycle.

Optimism fades

Looking ahead, however, optimism among eurozone businesses appears to be fading. Forward-looking indicators showed that expectations for future activity fell to their lowest level in 18 months, driven by concerns over rising protectionism, geopolitical instability, and the prospect of continued sluggish growth in major trading partners. As a result, the outlook for the eurozone economy remains fragile, with any rebound likely to be gradual and vulnerable to external shocks.