Euro Zone Growth Stalls in June Amid Weak Services and Manufacturing Sectors

The euro zone economy showed little to no growth for the second consecutive month in June, as activity in both the services and manufacturing sectors remained subdued, according to a survey released Monday. HCOB’s flash composite Purchasing Managers’ Index (PMI), compiled by S&P Global, held steady at 50.2—the same as May—barely above the 50 threshold that separates growth from contraction and below the Reuters forecast of 50.5.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted, “The euro zone economy is struggling to gain momentum. Growth has been minimal for six months, with services stagnating and manufacturing only slightly improving.” While Germany showed signs of cautious recovery, France continued to lag behind.

New business activity declined for the 13th straight month, though the drop was modest. The new business index edged up to 49.7 from 49.0 in May. The services PMI ticked up to 50.0, meeting expectations and signaling stabilization. Optimism among services firms improved, with the business expectations index jumping to 57.9, the highest in four months.

However, manufacturing continued to underperform. The sector’s headline PMI stayed at 49.4, below expectations of 49.8, marking a persistent downturn since mid-2022. The output subindex, which feeds into the composite PMI, slipped to 51.0 from 51.5. Factories also lowered their selling prices for a second consecutive month, with the output prices index unchanged at 49.2.

Euro zone inflation dipped below the European Central Bank’s 2% target in May. Despite a recent rate cut, ECB policymakers, including Bundesbank President Joachim Nagel, signaled that further monetary easing may be on hold as they remain focused on anchoring inflation.