Economic Buzz: Eurozone business activity falls into contraction as services weaken and costs rise
The decline was mainly driven by the services sector, where activity fell for the first time in nearly a year and at the fastest pace since February 2021. In contrast, manufacturing output continued to grow for the fourth straight month, reaching its strongest level since last August, partly due to firms building safety stocks.
The downturn was broad-based across the region. Germany saw its first drop in activity in 11 months, while France recorded its sharpest decline since February 2025. The rest of the eurozone also experienced a slight contraction, ending a growth streak that began in January 2024.
New orders fell for the second consecutive month and at the fastest rate in almost one-and-a-half years, mainly due to weaker demand in services. Meanwhile, manufacturing orders rose at the quickest pace in four years, supported by the first increase in export demand since February 2022, although some of this was linked to precautionary buying amid supply concerns.
Inflationary pressures intensified, with input costs rising at the fastest rate since late 2022. Manufacturers faced stronger cost increases than service providers. Selling prices also climbed, with output charge inflation reaching a 37-month high.
Supply chain disruptions worsened, with delivery times lengthening to the greatest extent since July 2022. Employment declined slightly, while business confidence dropped to its lowest level since November 2022, with sentiment particularly weak in services.
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