Eurozone business activity returns to growth as PMI hits 5-month high

Eurozone business activity returned to growth in July for the first time in four months, with the S&P Global ↘ 2.11% Flash Composite PMI surging to 51.9 from 50.0 in June, far exceeding the Reuters poll expectation of 50.3, preliminary data released on Friday showed.pmi.spglobal+2

The broad-based improvement came as new orders grew for the first time since February at the fastest pace since April 2023, while both manufacturing and services sectors contributed to the recovery.globalbankingandfinance

Sector and Country Breakdown

Services activity rose to 51.6 from 49.4, snapping three consecutive months of contraction and confounding expectations for a further decline. Manufacturing output growth hit a 52-month high, with the headline factory PMI climbing to 52.0 from 51.4, above the poll estimate of 51.5.investinglive+1

Germany, the eurozone's largest economy, returned to growth for the first time in four months. France's output continued to fall, though only marginally, while the rest of the bloc posted its strongest expansion in eight months.globalbankingandfinance+1

Staffing levels also rose after months of job shedding, though continued cuts in manufacturing employment tempered services-sector gains.globalbankingandfinance

Cautious Optimism

"July is seeing a welcome revival of economic activity in the euro zone, but a volatile geopolitical environment means it remains to be seen if the good news can last," said Chris Williamson, chief business economist at S&P Global Market Intelligence.globalbankingandfinance

Williamson added that the PMI level is "indicative of GDP growing at a reasonably solid 0.3% quarterly pace" after a largely stagnant second quarter. The eurozone economy contracted 0.2% in the first quarter of 2026, weighed by the Middle East conflict's impact on energy supplies and inflation.globalbankingandfinance

Input cost inflation eased to its lowest since February — when the Middle East conflict erupted — though pressures remained elevated. The European Central Bank left its key deposit rate at 2.25% on Thursday, with a Reuters poll suggesting a 25-basis-point hike in September.globalbankingandfinance