Eurozone private sector activity weakens as Middle East conflict hammers confidence

(Sharecast News) - Private-sector output across the eurozone contracted at its sharpest rate in almost a year and a half in April, as resilience among manufacturers was outweighed by a renewed downturn within the services sector. The flash estimate of S&P Global's eurozone composite purchasing managers' index, which tracks developments across the services and manufacturing sectors combined, dropped to 48.6 this month from 50.7 in March.

This was the first dip below the neutral 50-point mark in 16 months and the lowest level recorded since November 2024, with sentiment among firms falling to its lowest since late-2022.

The manufacturing PMI jumped to 52.2 from 51.6, marking its highest reading in almost four years despite "severe" supply chain disruption experienced by firms during the month due to the Iran war, S&P Global said. Manufacturers saw suppliers' delivery times increase to their longest since mid-2022.

However, the strong headline reading within manufacturing masks a gloomier outlook, according to Chris Williamson, chief business economist at S&P Global Market Intelligence.

"The sustained growth of manufacturing [...] comes with something of a sting in the tail, as demand for goods is being buoyed by stock building as companies scramble to secure purchases ahead of further price hikes or supply shortages," Williamson said.

"Manufacturers have increased their buying of inputs to a degree not witnessed since early 2022 as supply chain delays have also risen to the most widespread since the pandemic."

Meanwhile, the services PMI sank to 47.4, down from 50.2 the month before. This was the first decline in business activity in nearly a year and the sharpest rate of decline since February 2021.

"The eurozone is facing deepening economic woes from the war in the Middle East, presenting a major headache for policymakers. The conflict has pushed the economy into decline in April, while driving inflation sharply higher. Increasingly widespread supply shortages meanwhile threaten to dampen growth further while adding more upward pressure to prices in the coming weeks," said Chris Williamson, chief business economist at S&P Global Market Intelligence.