Eurozone composite PMI revised higher

The HCOB Eurozone Composite PMI rose to 50.6 in June 2025, up from both May’s reading of 50.0 and the preliminary estimate of 50.2. While the increase indicated only modest overall growth, it marked the strongest expansion in three months, signaling the first clear sign of upward momentum in both the manufacturing and services sectors across the region since early 2024.

Growth was driven by faster output increases in both sectors. Manufacturing, which had been a persistent drag on overall economic activity, showed signs of stabilization, aided by easing supply chain constraints, declining energy costs, and balanced inventory levels. The services sector also expanded at a firmer pace, buoyed by continued strength in travel, business services, and consumer-facing industries.

Among individual member states, Ireland led the expansion rankings for the fourth consecutive month, reflecting robust performance in technology and professional services. Spain, Italy, and Germany followed with moderate gains, each showing signs of improvement in both domestic and export demand. However, France continued to lag behind, recording a tenth straight monthly contraction, burdened by sluggish consumer spending and ongoing political and economic uncertainty.

The modest rise in output was largely supported by firms working through existing backlogs, which declined for the 27th month in a row. While this supported current activity levels, it also highlighted an ongoing lack of fresh orders. Indeed, new business fell for the 13th consecutive month, pointing to persistent weakness in underlying demand amid elevated interest rates, tight credit conditions, and lingering geopolitical uncertainty.

Employment growth across the bloc remained subdued, with only marginal gains reported. Companies continued to exhibit caution in hiring decisions, waiting for more consistent signs of recovery before committing to workforce expansion.

On the price front, input cost inflation remained stable at May’s six-month low, reflecting continued normalization in raw material and transport costs. Firms also reported limited pricing power, as competitive pressures and cautious customer spending limited their ability to pass on costs through higher output charges.

There was a more encouraging trend in sentiment. Business confidence improved further in June, reaching its highest level since July 2024. This marked a continuation of the recovery from April’s 18-month low and was driven by optimism about easing inflation, anticipated rate cuts from the European Central Bank, and gradually improving global trade dynamics.

In summary, June’s PMI data suggests that the eurozone economy is showing early signs of recovery, though the expansion remains fragile and uneven across the bloc. Sustained improvement will likely depend on continued easing in inflation, renewed demand, and clear policy signals from both monetary and fiscal authorities aimed at supporting growth without reigniting price pressures.