The eurozone economy moved into contraction in April 2026 for the first time in 16 months, according to flash data from S&P Global.
The S&P Global Flash Eurozone Composite PMI Output Index stood at 48.6 in April, compared to 50.7 in March, dropping below the 50 threshold and bringing to an end a 15-month sequence of growth.
‘Deepening economic woes’
“The eurozone is facing deepening economic woes from the war in the Middle East, presenting a major headache for policymakers,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence.
“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.”
Sector performance
The decline in output was driven by the services sector, where business activity fell to 47.4, marking its lowest level in 62 months, and posting its sharpest decline since early 2021.
In contrast, manufacturing output continued to grow, with the Manufacturing Output Index rising to 52.2, its highest level in eight months. The broader Manufacturing PMI also increased to 52.2, reaching a 47-month high.
On a country-by-country basis, Germany recorded its first decline in business activity in 11 months, while France experienced its sharpest contraction since February 2025. Other eurozone countries also reported a slight fall in output, ending a growth trend that had continued since early 2024.
New orders declined for a second consecutive month, with the fall concentrated in services, the data showed. Manufacturing new orders, however, increased at the fastest pace in four years, supported in part by firms building inventories in response to concerns about supply disruptions and rising costs.
Elsewhere, inflationary pressures intensified during the month – input costs rose at the fastest rate since late 2022, while output prices increased at the highest pace in 37 months.
‘Biggest surge in cost pressures’
“Input costs and selling prices have already jumped higher not just in response to higher energy costs but in a reflection of a broader upturn in commodity prices and mis-match of demand against constrained supply,” said Williamson. “If the COVID-19 pandemic is excluded, this is the biggest surge in cost pressures that we have recorded since 2000.
“Not surprisingly, businesses are taking an increasingly gloomy view of the outlook, with sentiment now down to its lowest since late 2022.
“In this environment, the ECB once again has the unenviable task of deciding whether to raise interest rates in the face of the worrying inflation picture, or whether this price spike will prove temporary and its focus should instead be on the need to prevent the economy sliding into a deeper downturn. While postponing any decision could make either scenario worse, it would be understandable to see rate setters sit on their hands and await more clarity on the situation, both in terms of the conflict and the assessment of the eurozone’s economic health.” Read more here.
