Eurozone business activity grows slightly

The HCOB Eurozone Composite PMI held steady at 50.2 in June 2025, unchanged from the previous month and slightly below market expectations of 50.5, according to a flash estimate.

While the index remained above the crucial 50.0 threshold for a sixth consecutive month—signaling ongoing expansion—it continued to suggest that growth momentum in the euro area remains subdued and fragile.

The breakdown of the data showed diverging sectoral dynamics. Activity in the services sector edged up to a neutral 50.0 from 49.7 in May, indicating a halt in the prior contraction but falling short of a clear return to growth. Meanwhile, manufacturing activity continued to stagnate, with the PMI for the sector unchanged at 49.4, reflecting persistent weakness in output and order books. Though production levels stabilized somewhat, subdued demand conditions remained a headwind.

At the aggregate level, new business orders declined marginally, though the pace of contraction was the softest seen in the current 13-month downturn. This modest improvement was dampened by continued weakness in export orders, driven by concerns over potential U.S. tariffs and the ongoing depreciation of the euro, which introduced additional uncertainty into cross-border trade. In response to sluggish incoming demand, companies continued to work through their backlogs of outstanding business. This allowed for a slight rise in employment, as firms looked to maintain capacity in anticipation of a future rebound.

On the pricing front, input cost inflation eased for the fourth consecutive month, helped by lower energy and raw material prices. However, cost pressures remained uneven across sectors. While manufacturers saw a more noticeable reduction in cost burdens, service providers continued to face wage-driven cost increases and responded by raising their output prices for export markets.

Looking ahead, there was a notable improvement in business confidence across the bloc, with optimism reaching its highest level since January. Firms cited hopes of improved demand conditions, stabilization in financial markets, and potential monetary easing later in the year as reasons for a more positive outlook. Nonetheless, the data underscored the fragile state of the recovery, with risks still tilted to the downside amid geopolitical uncertainties and patchy external demand.