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Euro Zone Growth Slows to Nine-Month Low Amid Rising Costs

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Economic growth across the euro zone slowed sharply in March as rising energy costs and supply chain disruptions weighed on business activity. According to data from S&P Global, the composite Purchasing Managers’ Index (PMI) for the region fell to 50.7 from 51.9 in February, marking its lowest level in nine months, though still marginally indicating expansion.

The slowdown was largely driven by weakening demand, with new business declining for the first time in eight months. Analysts from S&P Global Market Intelligence highlighted that the ongoing Middle East conflict has pushed up energy prices and disrupted supply chains, erasing earlier signs of recovery. Export orders also dropped, with international demand for services seeing its steepest fall in six months.

Business confidence and employment levels weakened, raising concerns about future growth. While countries like Spain showed resilience, major economies such as France and Italy contracted, and Germany’s growth slowed significantly. Rising input costs, now at a three-year high, have forced companies to increase prices, pushing inflation above the European Central Bank target and complicating the balance between controlling inflation and sustaining economic growth.

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Germany’s Service Sector Growth Slows to Seven-Month Low

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Germany’s service sector growth lost momentum in March, with business activity slowing sharply due to weakening demand linked to the ongoing Middle East conflict. The latest survey by S&P Global showed that the services Purchasing Managers’ Index (PMI) fell to 50.9 from 53.5 in February, marking its lowest level in seven months, though still slightly above the 50 threshold that indicates growth.

The slowdown has been attributed to rising costs, particularly fuel prices, and increased economic uncertainty. According to analysts at S&P Global Market Intelligence, service providers are struggling to pass on higher costs to customers due to weaker demand. New business inflows declined for the first time since September, highlighting the immediate impact of geopolitical tensions on the sector.

Business confidence has also taken a hit, with expectations dropping to a three-month low. The overall composite PMI, which combines manufacturing and services, slipped to 51.9 in March from 53.2 in February, largely driven by the downturn in services. Analysts warn that elevated energy prices, supply chain disruptions, and ongoing uncertainty could continue to weigh on Germany’s economic growth in the coming months.

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German Business Growth Slows in November as Manufacturing Contracts: PMI

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Germany’s private sector lost momentum in November, with manufacturing unexpectedly contracting and the services sector expanding at a slower pace, according to the latest HCOB flash composite Purchasing Managers’ Index (PMI) compiled by S&P Global. The index slipped to 52.1 from 53.9 in October, marking a two-month low. Despite the decline, the reading stayed above the 50-point threshold for the sixth consecutive month, signaling continued but weakening growth.

The manufacturing PMI fell deeper into contraction territory at 48.4, compared with 49.6 in October and below expectations for a slight improvement. The sector saw sharp drops in new orders, particularly export sales, which experienced their fastest decline since January. The downturn led to falling backlogs and a rise in job losses. Meanwhile, the services PMI also weakened to 52.7 from 54.6, missing forecasts and contributing to a subdued overall outlook.

“This is a major setback for Germany,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noting that hopes for stronger service sector expansion have faded. He warned that the economy is “limping towards marginal growth” in the fourth quarter. While government investment in defence and civil engineering has boosted optimism for future output, the finance ministry recently stated that only a moderate recovery is likely by year-end.

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