Financial News: Eurozone Private Sector Contracts Amid Middle East Tension

Eurozone Private Sector Contracts Amid Middle East Tensions

(RTTNews) - The euro area private sector contracted in April as geopolitical tensions in the Middle East deepened the economic woes, flash survey results from S&P Global revealed Thursday.

The composite output index fell to a 17-month low of 48.6 in April from 50.7 in March. The index fell below the 50.0 no change mark for the first time in 16 months in April.

The fall in output was centered on the service sector as the activity shrank for the first time in almost a year and at the steepest pace since February 2021.

Meanwhile, manufacturing output continued to grow, expanding for the fourth consecutive month and at the fastest pace since last August.

The services Purchasing Managers' Index registered 47.4 in April. The reading was expected to drop to 49.8 from 50.2 in March.

In contrast, the manufacturing PMI rose unexpectedly to 52.2 from 51.6 in the previous month. Economists had forecast the index to drop to 50.7.

The index signaled a 0.1 percent quarterly rate of GDP decline after a 0.2 percent gain suggested for the first quarter, S&P Global Chief Business Economist Chris Williamson said.

New orders fell for the second straight month in April, and at the fastest pace for almost a year-and-a-half. Business sentiment continued to wane after having hit a 21-month high in February. Sentiment reached its lowest since November 2022.

Inflationary pressures strengthened further, with both input costs and output prices rising at the sharpest rates in more than three years.

The war in the Middle East caused substantial supply chain delays in the Eurozone manufacturing sector. While output and new orders dropped in April, firms reduced employment at a marginal pace.

The fall in output was broad-based across the region. In Germany, business activity decreased for the first time in 11 months, while output in France fell at the sharpest pace since February 2025.

Germany's composite output index dropped to a 16-month low of 48.3 in April from 51.9 in the previous month. The score was the lowest since December 2024.

The downturn was driven by a marked reduction in service sector business activity, which registered its worst slump in almost three-and-a-half years. The services PMI declined to 46.9 from 50.9 a month ago.

At the same time, manufacturing activity growth dropped moderated in April. The corresponding index posted 51.2 compared to 52.2 in the previous month.

France's private sector shrank the most since early 2025 in April reflecting deterioration in the service sector as manufacturing output grew at the strongest pace in over four years.

The flash composite output index fell to a 14-month low of 47.6 in April from 48.8 in March. The score was forecast to fall to 48.6.

The services PMI dropped more-than-expected to 46.5 in April from 48.8 a month ago. The reading was seen at 48.5. On the other hand, the manufacturing PMI posted a 47-month high of 52.8, up from 50.0 in March. The score was above forecast of 49.5.

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