Eurozone Growth Stalls as ECB Faces Tough July Decision

The eurozone economy showed little momentum in June, with business activity stagnating and PMI figures missing market expectations. 

The composite PMI for the bloc held steady at 50.2, just above the line separating growth from contraction, but short of the anticipated 50.5. The services sector edged up to 50, while manufacturing stayed at 49.4, highlighting weak demand despite the European Central Bank’s recent rate cut to 2%.

Germany provided probably the only bright spot, with its composite PMI touching 50.4 in June from 48.5 the month before. Manufacturing new orders posted their strongest rise in over three years, fuelling cautious optimism that Europe’s largest economy may shake off its stop-start growth pattern. 

German services also improved, hitting 49.4, the mildest contraction seen in months. France, however, dragged the region down, with its PMI sliding to 48.5, marking a shocking ten straight months of decline. French firms blamed this situation on falling demand, stiff global competition, and ongoing uncertainty around trade.

What Does This Mean for Me?

US military action in Iran over the weekend has fuelled concerns of escalating Middle East conflict, pushing oil prices higher and threatening Europe’s fragile inflation trajectory. With nearly 20% of global crude passing through the Strait of Hormuz, energy markets remain on edge.

Compounding the volatility, Europe’s temporary trade truce with the US expires on July 9. If no deal emerges, new tariffs could add to the region’s economic headwinds, leaving the ECB with limited room to manoeuvre.