Private sector activity across the eurozone showed little sign of progress in June, with the latest Purchasing Managers’ Index (PMI) data highlighting stagnation in both services and manufacturing, casting a shadow over the region’s economic recovery.

The flash eurozone Composite PMI for June remained at 50.2 points, unchanged from May and narrowly above the 50-point threshold that separates expansion from contraction. The figure came in slightly below market expectations of 50.5.

The services PMI edged up as expected to 50 from 49.7, while the manufacturing PMI was unchanged at 49.4, missing forecasts of a rise to 49.8.

Weak momentum despite easing financial conditions

“The eurozone economy is struggling to gain momentum,” said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

“For six months now, growth has been minimal, with activity in the service sector stagnating and manufacturing output rising only moderately.”

The subdued business activity persists despite a more accommodative monetary stance by the European Central Bank (ECB), which has again reduced its deposit facility rate by 25 basis points to 2.00%.

Regional disparities widen: Germany recovers, France falters

Regional disparities are becoming more pronounced.

Germany, the bloc’s largest economy, posted a marginal return to growth. The flash composite PMI rose to 50.4 in June from 48.5 in May, buoyed by demand in the manufacturing sector, which saw the fastest rise in new orders in over three years.

“There is a decent chance Germany could finally break out of the frustrating stop-start growth pattern it’s been stuck in for the past two years,” said de la Rubia, citing the positive trend in output and support from expansionary fiscal policies.

The German services PMI rose to 49.4 in June 2025 from 47.1 in May, surpassing market expectations of 47.5. The data signalled only a slight decline in activity, marking the mildest contraction since the current three-month downturn began.

Conversely, France continued its downward trajectory. The composite PMI dropped to 48.5 in June from 49.3 in May, marking the tenth consecutive monthly decline.

Both manufacturing and services contracted, with firms citing subdued domestic demand, intensifying international competition, and uncertainty surrounding global trade.

Overall sales fell for the thirteenth consecutive month in June, with the pace of decline quickening slightly from May. The sharper downturn was driven by the steepest drop in factory orders since February.

“The outlook is certainly clouded,” said Jonas Feldhusen, Junior Economist at HCOB.

“The question arises whether the decline in manufacturing output this month represents a mere temporary dip or already marks the end of the upward trend,” he added.

Will the ECB move again in July?

The latest PMI figures present a mixed picture for the ECB.

While inflationary pressures in the goods sector continue to ease, persistent cost increases in services and renewed geopolitical tensions may discourage further monetary easing in the near term.

Markets widely expect the ECB to hold its benchmark interest rate steady at 2% during its next policy meeting on 23-24 July.

However, the broader economic landscape remains volatile as US strikes in Iran over the weekend have heightened fears of a protracted conflict in the Middle East. The unrest has the potential to trigger a renewed surge in oil prices — especially as nearly 20% of global crude shipments pass through the Strait of Hormuz.

Adding to the uncertainty, the 90-day reciprocal tariff truce initiated by former US President Donald Trump is set to expire on 9 July. With negotiations still ongoing, time is running out for Europe to secure a trade agreement and avoid another disruptive wave of transatlantic tariffs.