Eurozone growth hits one-year high despite Trump's tariffs
The eurozone's provisional composite Purchasing Managers' Index (PMI), which measures overall activity in manufacturing and services across the single currency area, rose from 50.6 to 51.0 between June and July – an eleven-month high that pushed the index further above the 50-point mark separating growth from contraction.
Germany, the bloc's largest economy, continued to expand, although its rate of growth slowed slightly from 50.4 to 50.3. Activity in France, the eurozone's second-biggest economy, also rose to an eleven-month high, but remained in contraction territory at 49.6.
'The eurozone economy appears to be gradually regaining momentum,' said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB), which compiles the index together with S&P Global.
'Germany is playing a key role here and, together with other countries, has been able to more than offset the weakness in France,' he added, noting that 'French industry must also regain its footing' for the bloc's manufacturers to 'return to solid growth in the long term'.
De la Rubia also noted that 'even higher US tariffs should not fundamentally change' the recovery in German manufacturing, which has been boosted by government pledges to increase investments in infrastructure and defence by up to €1 trillion over the next decade.
Trump's tariffs on steel, aluminium, and cars have inflicted severe pain on German manufacturers – especially its export-dependent auto sector, which is already reeling from weak demand and fierce competition from Chinese electric vehicle makers.
The US is Germany's top car export destination, with 450,000 vehicles valued at roughly €21 billion sent across the Atlantic in 2024, according to the US commerce department.
Uncertainty in France, meanwhile, has been compounded by Prime Minister François Bayrou's controversial draft budget proposal, which was presented to lawmakers last week and aims to cut €44 billion in net government expenditure in 2026.
Jonas Feldhusen, junior economist at HCOB, said France's economy is likely to struggle regardless of whether Bayrou's proposal is eventually approved by the country's deeply divided parliament.
'Should an agreement on the austerity package be reached, it would reduce disposable income for many households – posing clear downside risks for domestic demand and especially for the services sector,' Feldhusen said. 'Conversely, failure to reach a budget deal could further escalate political uncertainty.'
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