Business activity in the Eurozone slowed more than expected by the end of 2025. According to survey data, the contraction in manufacturing deepened, while growth in the services sector, the engine of the economy, also lost momentum. Relative resilience was maintained throughout the year despite US tariffs and global uncertainties.
The HCOB Flash Eurozone Composite PMI, compiled by S&P Global, fell to 51.9 this month, its lowest level in three months, from 52.8 in November. This figure was below the Reuters survey expectation of 52.7.
However, the index finished a calendar year above 50, the growth-contraction threshold, for the first time since 2019. Hamburg Commercial Bank Chief Economist Cyrus de la Rubia stated that the weakening was particularly due to industrial production in Germany, while noting that there were signs of a cautious recovery in French industry and commented that “The start of the new year looks unstable.” Manufacturing PMI fell from 49.6 in November to 49.2, its lowest level since April. The manufacturing index contracted for the first time in 10 months, while new orders recorded their fastest decline since February. Although the services sector continued to drive growth, the PMI fell from 53.6 to 52.6, below expectations. Optimism for the future fell to its lowest level since May, while companies accelerated job growth. On the other hand, cost pressures intensified; input costs showed their fastest increase since March. Headline inflation, although slightly higher recently, remains around the ECB’s 2% target. This outlook reinforces the expectation that the ECB will keep interest rates stable until at least 2027, according to a Reuters survey.
