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Euronews
22-05-2025
- Business
- Euronews
EasyJet loss widens but UK budget airline confirms its 2025 targets
Private sector activity in the eurozone unexpectedly contracted in May for the first time this year, with weakening demand and renewed pessimism weighing on the services sector and dragging overall momentum to a six-month low. According to preliminary data compiled by S&P Global, the eurozone's Composite Purchasing Managers' Index (PMI) fell to 49.5 in May from 50.4 in April, below the 50.7 expected by economists and marking the lowest reading since November 2024. A figure below 50.0 signals contraction. The drop reflects a significant loss of momentum in services, where business activity declined for the first time in six months and at the sharpest pace since January 2024. The services PMI dropped to 48.9, from 50.1 in April, missing expectations of 50.3. Meanwhile, manufacturing remained weak, with a PMI reading of 48.4—up slightly from April's 48.0 but still firmly below the growth threshold. Business sentiment also deteriorated. Confidence in the euro area edged lower for a second consecutive month, reaching its weakest level since October 2023. The decline was again particularly pronounced in services, where optimism fell to levels not seen since September 2022. Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures show an economy struggling to gain traction. 'Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction,' he said. 'Do not blame US tariffs for this one. In fact, efforts to get ahead of those tariffs might partly explain why manufacturing has held up a bit better lately.' De la Rubia noted that eurozone manufacturers have now increased production for a third consecutive month, with new orders no longer declining—something not seen since April 2022 Yet, the services sector—typically more shielded from external shocks—appears increasingly vulnerable. 'Foreign demand for services is softening, but it's the sluggish domestic demand that seems to be dragging the sector down,' de la Rubia said. The result, he suggested, is a subdued outlook that aligns with cautious company sentiment and a hesitant recovery path. According to the expert, the latest PMI data offer a mixed picture for the European Central Bank (ECB). While service-sector sales price inflation ticked down slightly from an already low level, input costs are still rising and may even be accelerating. He attributed this mainly to higher wages, as energy prices continue to fall. Despite the continued cost pressures in services, de la Rubia said the ECB is likely to proceed with cautious interest rate cuts, especially as manufacturing purchase prices are now declining. In Germany, the eurozone's largest economy, business activity contracted further in May. The Composite PMI fell to 48.6 from 50.1 in April. While the manufacturing PMI ticked up to 48.8, services dragged the economy lower, with their index falling sharply to 47.2 from 49.0. 'Manufacturing is doing better, as output has been climbing for three months in a row, and new orders are following suit,' said de la Rubia. 'In the service sector, by contrast, activity has taken a sharper tumble, and that drop has pulled overall activity into contraction.' Still, hopes for fiscal stimulus—particularly in infrastructure and defence—could offer support in the months ahead. 'Falling input costs, especially cheaper energy, should offer manufacturers some breathing room,' de la Rubia added. In a separate release on Thursday, Germany's business morale, measured by the Ifo Institute, rose to 87.5 in May from 86.9, its highest level since June 2024. It marked a fifth consecutive monthly increase, diverging from S&P Global's weaker survey data. In France, the picture remained subdued but showed signs of stabilisation. The Composite PMI edged up slightly to 48.0 in May, from 47.8 in April, as the manufacturing PMI rose to 49.5—its highest since February 2023—while services remained soft at 47.4. 'France's private sector remained subdued in May,' said Jonas Feldhusen, junior economist at Hamburg Commercial Bank. 'The Flash Composite PMI continues to signal contraction, reflecting the economic challenges France is facing amid domestic political instability and a fragile macroeconomic environment.' Feldhusen noted a divergence between sectors: 'The manufacturing sector showed signs of recovery, supported by increased factory output. In contrast, the services sector deteriorated further, with weak new business and a decline in the employment outlook.' He flagged price dynamics as a growing concern. 'While output prices slipped into deflationary territory in May, input cost inflation accelerated, signalling a squeeze on profit margins, particularly in the services sector,' he said. Despite weaker-than-expected PMI data, the euro held firm on Thursday, supported by renewed investor scepticism toward the US dollar amid growing concerns over Washington's fiscal outlook. By 10:20 a.m. Central European Time, the euro was trading around $1.1330, broadly unchanged from Wednesday's levels. German bond markets also showed limited movement: 10-year Bund yields held steady at 2.65%, while two-year yields slipped by 3 basis points to 1.83%, reflecting expectations that the European Central Bank will continue its rate-cutting cycle. Eurozone equities followed Wall Street's Wednesday downturn. The Euro STOXX 50 index fell 1.4%, with losses recorded in 43 of its components. National indices posted more moderate declines. Germany's DAX and France's CAC 40 each dropped 0.7%, Italy's FTSE MIB fell 0.9%, and Spain's IBEX 35 lost 0.7%. Low-cost UK airline EasyJet saw its shares plunge on Thursday morning after the company reported widening losses but confirmed its targets for the financial year. The airline's headline loss before tax was £394 million (€467.3m) for the six months ending 31 March 2025, the first half of the company's financial year ending in September 2025. This compares to £350m (€415.1m) for the previous year. EasyJet also reported an 8% rise in its group revenue, to £3.53 billion (€4.2bn) from £3.27bn (€3.9bn) for the same period. Seat capacity increased by 6%, and the number of passengers rose by 8%. Strong winter bookings helped boost the results, but the timing of Easter made a negative impact of £50m (€59.3m). The income was also dragged down by increased investment and higher fuel costs. The company's share price plunged in the morning trade in London by 6%, it made up some losses by 10 a.m. when the shares traded more than 3% cheaper than the previous day's close. EasyJet holidays, the company's tour operator branch, delivered a £44m (€52.2m) profit, £13m (€15.4m) more compared to the same period in the previous year. The travel operator branch Easyjet holiday, which accounts for more than one-tenth of the group's revenue, has just teamed up with Tesco Clubcard, potentially reaching 23 million households. It is also expected to deliver a passenger growth of around 25% until the end of September 2025. Concerning the group's overall performance, 'We saw a strong financial performance in April reflecting the shift in Easter this year,' the report said, underpinning the company's expectations to be able to deliver its financial targets. The airline aims to generate more than £1bn (€1.2bn) in annual profit in the medium term. This is supported by increased bookings for the summer, with the third and fourth quarters already being 80% and 42% sold, respectively. 'We remain focused on delivering another record summer this year, expecting to drive strong earnings growth as we continue to progress towards our target of sustainably generating over £1 billion of annual profit before tax,' Kenton Jarvis, CEO of easyJet, said. The company is adopting new planes that are more fuel efficient, lowering costs, while adding new destinations. Richard Hunter, head of markets at Interactive Investor, said, 'Despite having posted its usual and expected winter loss, easyJet has on closer inspection made the sort of progress which should ensure another year of growing profitability.' As for the plunging share price, 'the price has risen by 21% over the last year, as compared to a gain of 4.5% for the wider FTSE100,' Hunter said, adding that good numbers for April are supporting hopes for the group. 'The market consensus of the shares as a buy [is] unlikely to waver despite any early turbulence in the share price reaction.' Bitcoin surged to a fresh record high on Thursday, fuelled by optimism that the US Congress will soon pass a bill ill for stablecoin- the GENIUS Act, which is set to be the first regulatory framework under the Trump Administration. During Thursday's Asian session, the world's largest cryptocurrency soared past $111,000 (€98,000) at 5:23 am CEST, surpassing its previous all-time high of over $109,000 (€96,000) set during President Trump's inauguration on 20 January. The rally was supported not only by legislative developments but also by increasing institutional interest. Crípto guru Michael Saylor's firm, Strategy, disclosed a further aggressive Bitcoin purchase worth $765 million (€675 million) on Monday, bringing its total holdings to over $63 billion (€56 billion). Major financial institutions, including JPMorgan Chase, Morgan Stanley and BlackRock, have also expanded crypto offerings to clients. 'Perhaps the most crucial shift is who's buying. This is the first real bull market where institutional participation is front and centre,' said Josh Gilbert, market analyst at eToro Australia. Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to reference assets such as the US dollar, the euro or commodities like gold. On Monday, a group of Senate Democrats dropped their opposition to the legislation, allowing it to clear a key procedural vote and raising hopes that the Senate will pass it as early as this week. The bill is expected to include provisions aimed at protecting stablecoin holders and regulating potential abuse for criminal or terrorist financing. Previously, the bill had stalled over concerns about potential conflicts of interest, stemming from President Trump's and his family's involvement in the cryptocurrency. Trump launched his own meme coin in January, while the Trump family business supported the launch of a new stablecoin, USD1, in March. USD1 is pegged to US dollar deposits and backed by short-term US Treasuries. David Sacks, the White House's crypto tsar and a senior AI adviser to Trump, said in an interview with CNBC that the bill's passage would boost demand for US government debt. 'If we provide the legal clarity and legal framework for this, I think we could create trillions of dollars of demand for our Treasuries practically overnight,' he said. Bitcoin has emerged as one of the top-performing risk assets this year, having risen nearly 20% year-to-date. In contrast, the S&P 500 has slipped 0.48%, while the Nasdaq has gained 2.7%. Meanwhile, gold, a traditional safe-haven asset, has climbed about 21% over the same period. Wednesday's US 20-year US government bond auction revealed tepid demand, pushing Treasury yields sharply higher. Bond yields move inversely to prices. The auction result underscored mounting investor concerns about Washington's ballooning debt burden, amid upcoming Trump's proposed tax bill. The market reaction also followed Moody's decision to downgrade the US credit outlook last Friday. Surging bond yields triggered renewed selling pressure across US assets, with stocks, the dollar and Treasuries all falling on Wednesday. Despite its impressive rally, Bitcoin remains a highly volatile financial asset with limited fundamental support, unlike stocks which are underpinned by corporate earnings.
Euronews
22-05-2025
- Business
- Euronews
OECD growth slows abruptly to 0.1% in the first three months of 2025
The combined economic output of the Organisation for Economic Co-operation and Development (OECD), was 0.1% in the first three months of 2025 compared to the previous quarter, according to provisional estimates of the organisation. This compares to a 0.5% rise in the last three months of 2024. 'This figure represents a departure from the higher and relatively stable growth rates recorded in the OECD area over the past two years,' the OECD said in its report. The overall GDP growth rate also slowed for the G7, the seven strongest economies in the world, from 0.4% to 0.1% for the same period. Japan and the US saw their economies contract from 0.6% in both countries to -0.2% and -0.1%, respectively. Both countries saw their imports increasing significantly; however, in the United States, imports of goods increased sharply by 10.8% in Q1, compared with a contraction of 1.3% in Q4. 'The rise in US imports of goods, likely influenced by anticipated changes to trade tariffs, was the main drag on growth,' the report said. Growth also slowed in Canada, from 0.6% to 0.4%. In a quarterly comparison, UK GDP growth jumped from 0.1% to 0.7%, mainly driven by investments and exports of goods. In the EU, growth increased marginally in Italy (from 0.2% to 0.3%), and it turned positive in Germany (0.2%) and France (0.1%). Ireland recorded the highest quarter-on-quarter growth rate in Q1 (3.2%). On the other hand, Slovenia recorded the largest fall in GDP in Q1 (‑0.8%), followed by Portugal (-0.5%). Year-on-year, GDP growth in the OECD was 1.6% in Q1 2025, down from 1.9% in Q4 2024. Among G7 economies, Canada recorded the highest growth over the last four quarters (2.3%), followed by the United States (2.0%), while Germany recorded the largest fall (-0.2%). Year-on-year, GDP growth in the OECD was 1.6% in Q1 2025, down from 1.9% in Q4 2024. In Europe, the French economy expanded by 0.8% compared to the previous year, the Italian GDP also grew by 0.6%, but the German output contracted by 0.2%. The OECD has recently published its global outlook, predicting slower growth, dragged down by trade disruptions and potential inflationary pressure. The organisation cut its global growth forecast by 0.2 percentage points to 3.1% for this year. Europe's economy is also facing "heightened uncertainty" and is set for a weaker-than-expected recovery. As for the eurozone, the OECD expects GDP in the bloc to expand by 1% in 2025 instead of the previously expected 1.3%. Recent data from Eurostat shows that the combined growth of the 20 member states rose by 0.3% in both the euro area, compared with the previous quarter. Private sector activity in the eurozone unexpectedly contracted in May for the first time this year, with weakening demand and renewed pessimism weighing on the services sector and dragging overall momentum to a six-month low. According to preliminary data compiled by S&P Global, the eurozone's Composite Purchasing Managers' Index (PMI) fell to 49.5 in May from 50.4 in April, below the 50.7 expected by economists and marking the lowest reading since November 2024. A figure below 50.0 signals contraction. The drop reflects a significant loss of momentum in services, where business activity declined for the first time in six months and at the sharpest pace since January 2024. The services PMI dropped to 48.9, from 50.1 in April, missing expectations of 50.3. Meanwhile, manufacturing remained weak, with a PMI reading of 48.4—up slightly from April's 48.0 but still firmly below the growth threshold. Business sentiment also deteriorated. Confidence in the euro area edged lower for a second consecutive month, reaching its weakest level since October 2023. The decline was again particularly pronounced in services, where optimism fell to levels not seen since September 2022. Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures show an economy struggling to gain traction. 'Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction,' he said. 'Do not blame US tariffs for this one. In fact, efforts to get ahead of those tariffs might partly explain why manufacturing has held up a bit better lately.' De la Rubia noted that eurozone manufacturers have now increased production for a third consecutive month, with new orders no longer declining—something not seen since April 2022 Yet, the services sector—typically more shielded from external shocks—appears increasingly vulnerable. 'Foreign demand for services is softening, but it's the sluggish domestic demand that seems to be dragging the sector down,' de la Rubia said. The result, he suggested, is a subdued outlook that aligns with cautious company sentiment and a hesitant recovery path. According to the expert, the latest PMI data offer a mixed picture for the European Central Bank (ECB). While service-sector sales price inflation ticked down slightly from an already low level, input costs are still rising and may even be accelerating. He attributed this mainly to higher wages, as energy prices continue to fall. Despite the continued cost pressures in services, de la Rubia said the ECB is likely to proceed with cautious interest rate cuts, especially as manufacturing purchase prices are now declining. In Germany, the eurozone's largest economy, business activity contracted further in May. The Composite PMI fell to 48.6 from 50.1 in April. While the manufacturing PMI ticked up to 48.8, services dragged the economy lower, with their index falling sharply to 47.2 from 49.0. 'Manufacturing is doing better, as output has been climbing for three months in a row, and new orders are following suit,' said de la Rubia. 'In the service sector, by contrast, activity has taken a sharper tumble, and that drop has pulled overall activity into contraction.' Still, hopes for fiscal stimulus—particularly in infrastructure and defence—could offer support in the months ahead. 'Falling input costs, especially cheaper energy, should offer manufacturers some breathing room,' de la Rubia added. In a separate release on Thursday, Germany's business morale, measured by the Ifo Institute, rose to 87.5 in May from 86.9, its highest level since June 2024. It marked a fifth consecutive monthly increase, diverging from S&P Global's weaker survey data. In France, the picture remained subdued but showed signs of stabilisation. The Composite PMI edged up slightly to 48.0 in May, from 47.8 in April, as the manufacturing PMI rose to 49.5—its highest since February 2023—while services remained soft at 47.4. 'France's private sector remained subdued in May,' said Jonas Feldhusen, junior economist at Hamburg Commercial Bank. 'The Flash Composite PMI continues to signal contraction, reflecting the economic challenges France is facing amid domestic political instability and a fragile macroeconomic environment.' Feldhusen noted a divergence between sectors: 'The manufacturing sector showed signs of recovery, supported by increased factory output. In contrast, the services sector deteriorated further, with weak new business and a decline in the employment outlook.' He flagged price dynamics as a growing concern. 'While output prices slipped into deflationary territory in May, input cost inflation accelerated, signalling a squeeze on profit margins, particularly in the services sector,' he said. Despite weaker-than-expected PMI data, the euro held firm on Thursday, supported by renewed investor scepticism toward the US dollar amid growing concerns over Washington's fiscal outlook. By 10:20 a.m. Central European Time, the euro was trading around $1.1330, broadly unchanged from Wednesday's levels. German bond markets also showed limited movement: 10-year Bund yields held steady at 2.65%, while two-year yields slipped by 3 basis points to 1.83%, reflecting expectations that the European Central Bank will continue its rate-cutting cycle. Eurozone equities followed Wall Street's Wednesday downturn. The Euro STOXX 50 index fell 1.4%, with losses recorded in 43 of its components. National indices posted more moderate declines. Germany's DAX and France's CAC 40 each dropped 0.7%, Italy's FTSE MIB fell 0.9%, and Spain's IBEX 35 lost 0.7%.
Yahoo
22-05-2025
- Business
- Yahoo
Eurozone private sector slips into contraction as services falter in May
Private sector activity in the eurozone unexpectedly contracted in May for the first time this year, with weakening demand and renewed pessimism weighing on the services sector and dragging overall momentum to a six-month low. According to preliminary data compiled by S&P Global, the eurozone's Composite Purchasing Managers' Index (PMI) fell to 49.5 in May from 50.4 in April, below the 50.7 expected by economists and marking the lowest reading since November 2024. A figure below 50.0 signals contraction. The drop reflects a significant loss of momentum in services, where business activity declined for the first time in six months and at the sharpest pace since January 2024. The services PMI dropped to 48.9, from 50.1 in April, missing expectations of 50.3. Meanwhile, manufacturing remained weak, with a PMI reading of 48.4—up slightly from April's 48.0 but still firmly below the growth threshold. Business sentiment also deteriorated. Confidence in the euro area edged lower for a second consecutive month, reaching its weakest level since October 2023. The decline was again particularly pronounced in services, where optimism fell to levels not seen since September 2022. Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures show an economy struggling to gain traction. 'Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction,' he said. 'Do not blame US tariffs for this one. In fact, efforts to get ahead of those tariffs might partly explain why manufacturing has held up a bit better lately.' De la Rubia noted that eurozone manufacturers have now increased production for a third consecutive month, with new orders no longer declining—something not seen since April 2022 Yet, the services sector—typically more shielded from external shocks—appears increasingly vulnerable. 'Foreign demand for services is softening, but it's the sluggish domestic demand that seems to be dragging the sector down,' de la Rubia said. The result, he suggested, is a subdued outlook that aligns with cautious company sentiment and a hesitant recovery path. According to the expert, the latest PMI data offer a mixed picture for the European Central Bank (ECB). While service-sector sales price inflation ticked down slightly from an already low level, input costs are still rising and may even be accelerating. He attributed this mainly to higher wages, as energy prices continue to fall. Despite the continued cost pressures in services, de la Rubia said the ECB is likely to proceed with cautious interest rate cuts, especially as manufacturing purchase prices are now declining. In Germany, the eurozone's largest economy, business activity contracted further in May. The Composite PMI fell to 48.6 from 50.1 in April. While the manufacturing PMI ticked up to 48.8, services dragged the economy lower, with their index falling sharply to 47.2 from 49.0. 'Manufacturing is doing better, as output has been climbing for three months in a row, and new orders are following suit,' said de la Rubia. 'In the service sector, by contrast, activity has taken a sharper tumble, and that drop has pulled overall activity into contraction.' Still, hopes for fiscal stimulus—particularly in infrastructure and defence—could offer support in the months ahead. 'Falling input costs, especially cheaper energy, should offer manufacturers some breathing room,' de la Rubia added. In a separate release on Thursday, Germany's business morale, measured by the Ifo Institute, rose to 87.5 in May from 86.9, its highest level since June 2024. It marked a fifth consecutive monthly increase, diverging from S&P Global's weaker survey data. In France, the picture remained subdued but showed signs of stabilisation. The Composite PMI edged up slightly to 48.0 in May, from 47.8 in April, as the manufacturing PMI rose to 49.5—its highest since February 2023—while services remained soft at 47.4. 'France's private sector remained subdued in May,' said Jonas Feldhusen, junior economist at Hamburg Commercial Bank. 'The Flash Composite PMI continues to signal contraction, reflecting the economic challenges France is facing amid domestic political instability and a fragile macroeconomic environment.' Feldhusen noted a divergence between sectors: 'The manufacturing sector showed signs of recovery, supported by increased factory output. In contrast, the services sector deteriorated further, with weak new business and a decline in the employment outlook.' He flagged price dynamics as a growing concern. 'While output prices slipped into deflationary territory in May, input cost inflation accelerated, signalling a squeeze on profit margins, particularly in the services sector,' he said. Despite weaker-than-expected PMI data, the euro held firm on Thursday, supported by renewed investor scepticism toward the US dollar amid growing concerns over Washington's fiscal outlook. By 10:20 a.m. Central European Time, the euro was trading around $1.1330, broadly unchanged from Wednesday's levels. German bond markets also showed limited movement: 10-year Bund yields held steady at 2.65%, while two-year yields slipped by 3 basis points to 1.83%, reflecting expectations that the European Central Bank will continue its rate-cutting cycle. Eurozone equities followed Wall Street's Wednesday downturn. The Euro STOXX 50 index fell 1.4%, with losses recorded in 43 of its components. National indices posted more moderate declines. Germany's DAX and France's CAC 40 each dropped 0.7%, Italy's FTSE MIB fell 0.9%, and Spain's IBEX 35 lost 0.7%.
Euronews
23-04-2025
- Business
- Euronews
Eurozone economy stalls in April as tariffs rattle services activity
ADVERTISEMENT Economic momentum in the eurozone stalled in April, as recent trade tensions battered the services sector, undermining fragile optimism for the bloc's recovery path. The eurozone's Composite Purchasing Managers' Index (PMI), a closely watched gauge of private sector health, dipped to 50.1 in April from 50.9 in March, falling short of consensus expectations of 50.3. The figure, barely above the 50.0 threshold that separates growth from contraction, suggests stagnation across the bloc's economy as the second quarter began. April's performance marked a divergence between a mildly resurgent manufacturing sector and a services sector that slid into contraction. The flash Services PMI fell from 51 to 49.7, the first decline in five months, while the Manufacturing PMI nudged higher to 48.7, surpassing forecasts of a fall to 47.5. Surveys witnessed a sharp deterioration in business confidence across the euro area, with sentiment sinking to its lowest level since November 2022 and remaining well below the series average. The decline was broad-based, affecting both manufacturing and services, and was evident across most major eurozone economies, reflecting widespread caution amid rising geopolitical and trade-related uncertainty. Tariff worries hit German services, yet manufacturing remains resilient In Germany, the eurozone's industrial heartland, business activity retreated after three months of expansion. The Germany's Composite PMI dropped from March's 51.3 to 49.7 in April. Services suffered a steeper fall, with the sector's PMI plunging to 48.8, down from 50.9, well below expectations of 50.3. Service providers cited tariff-related uncertainty and hesitant clients. 'Concerns over tariffs and the broader economic outlook have led to delays in decision-making and restrained spending,' de la Rubia said. Despite this, employment in Germany's private sector dipped only marginally, and manufacturing margins improved due to falling input prices, particularly in energy. The fall in energy prices, tied to fears of a US recession, has been a tailwind for producers. Manufacturing firms also reported a rare rise in export orders and a modest ability to raise selling prices, hinting at budding pricing power for the first time in nearly a year. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said manufacturing 'seems to be holding up better than expected' in the face of the fresh tariffs announced by US President Donald Trump earlier this month. These include a general 10% levy and a 25% charge on car imports. 'Most manufacturers in the eurozone are not too fazed,' he said. 'Instead of falling off a cliff, they've actually increased production for the second month in a row, and even more robustly than in March.' France struggles as downturn deepens France, however, painted a bleaker picture. The Composite PMI slid to 47.3 in April from 48, below forecasts of 47.8. The country's services sector bore the brunt of the contraction, with a Services PMI of 46.8, while manufacturing remained weak, though stabilising somewhat at 48.2. 'Notably, the latest survey data pointed to pronounced demand weakness within domestic markets,' the report stated. ADVERTISEMENT Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said France's private sector 'will face substantial pressure in the coming months,' highlighting a steep deterioration in orders and dimming expectations. 'The service sector remains in a precarious state,' he said. 'As the second quarter begins, business activity deteriorated, with declines in both domestic and foreign new business. In response, service providers reduced their workforce.' While production in French factories edged up, Feldhusen said it was 'not yet indicative of a sustainable turnaround.' Political uncertainty and fiscal fragility are compounding the issue, he added, noting France's 'fragile debt situation' and 'constant risk of government collapse.' Inflation pressures ease as ECB watches closely The April PMI data carried some encouragement for the European Central Bank (ECB) as it considers the pace of policy easing. ADVERTISEMENT Cost inflation eased, with input prices rising at their slowest pace since November 2024. Output price inflation also moderated to a five-month low. De la Rubia said: 'The European Central Bank is getting some mild support for its rate-cutting stance from the price indicators in the services sector,' though he cautioned that rising service-sector costs are still squeezing margins. According to Feldhusen, the fading price pressures could broaden in the coming months, especially if trade frictions lead to unsold goods remaining in the bloc. 'We anticipate that trade frictions will negatively impact domestic prices,' he said, forecasting increased room for monetary easing. ADVERTISEMENT The experts expect the ECB to implement three more rate cuts this year. Looking ahead, economists see a potential buffer in fiscal expansion. De la Rubia flagged the positive impact of rising European defence budgets and planned German infrastructure investment. 'This should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag,' he said.
Yahoo
23-04-2025
- Business
- Yahoo
Eurozone economy stalls in April as tariffs rattle services activity
Economic momentum in the eurozone stalled in April, as recent trade tensions battered the services sector, undermining fragile optimism for the bloc's recovery path. The eurozone's Composite Purchasing Managers' Index (PMI), a closely watched gauge of private sector health, dipped to 50.1 in April from 50.9 in March, falling short of consensus expectations of 50.3. The figure, barely above the 50.0 threshold that separates growth from contraction, suggests stagnation across the bloc's economy as the second quarter began. April's performance marked a divergence between a mildly resurgent manufacturing sector and a services sector that slid into contraction. The flash Services PMI fell from 51 to 49.7, the first decline in five months, while the Manufacturing PMI nudged higher to 48.7, surpassing forecasts of a fall to 47.5. Surveys witnessed a sharp deterioration in business confidence across the euro area, with sentiment sinking to its lowest level since November 2022 and remaining well below the series average. The decline was broad-based, affecting both manufacturing and services, and was evident across most major eurozone economies, reflecting widespread caution amid rising geopolitical and trade-related uncertainty. In Germany, the eurozone's industrial heartland, business activity retreated after three months of expansion. The Germany's Composite PMI dropped from March's 51.3 to 49.7 in April. Services suffered a steeper fall, with the sector's PMI plunging to 48.8, down from 50.9, well below expectations of 50.3. Service providers cited tariff-related uncertainty and hesitant clients. 'Concerns over tariffs and the broader economic outlook have led to delays in decision-making and restrained spending,' de la Rubia said. Despite this, employment in Germany's private sector dipped only marginally, and manufacturing margins improved due to falling input prices, particularly in energy. The fall in energy prices, tied to fears of a US recession, has been a tailwind for producers. Manufacturing firms also reported a rare rise in export orders and a modest ability to raise selling prices, hinting at budding pricing power for the first time in nearly a year. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said manufacturing 'seems to be holding up better than expected' in the face of the fresh tariffs announced by US President Donald Trump earlier this month. These include a general 10% levy and a 25% charge on car imports. 'Most manufacturers in the eurozone are not too fazed,' he said. 'Instead of falling off a cliff, they've actually increased production for the second month in a row, and even more robustly than in March.' France, however, painted a bleaker picture. The Composite PMI slid to 47.3 in April from 48, below forecasts of 47.8. The country's services sector bore the brunt of the contraction, with a Services PMI of 46.8, while manufacturing remained weak, though stabilising somewhat at 48.2. 'Notably, the latest survey data pointed to pronounced demand weakness within domestic markets,' the report stated. Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, said France's private sector 'will face substantial pressure in the coming months,' highlighting a steep deterioration in orders and dimming expectations. 'The service sector remains in a precarious state,' he said. 'As the second quarter begins, business activity deteriorated, with declines in both domestic and foreign new business. In response, service providers reduced their workforce.' While production in French factories edged up, Feldhusen said it was 'not yet indicative of a sustainable turnaround.' Political uncertainty and fiscal fragility are compounding the issue, he added, noting France's 'fragile debt situation' and 'constant risk of government collapse.' The April PMI data carried some encouragement for the European Central Bank (ECB) as it considers the pace of policy easing. Cost inflation eased, with input prices rising at their slowest pace since November 2024. Output price inflation also moderated to a five-month low. De la Rubia said: 'The European Central Bank is getting some mild support for its rate-cutting stance from the price indicators in the services sector,' though he cautioned that rising service-sector costs are still squeezing margins. According to Feldhusen, the fading price pressures could broaden in the coming months, especially if trade frictions lead to unsold goods remaining in the bloc. 'We anticipate that trade frictions will negatively impact domestic prices,' he said, forecasting increased room for monetary easing. The experts expect the ECB to implement three more rate cuts this year. Looking ahead, economists see a potential buffer in fiscal expansion. De la Rubia flagged the positive impact of rising European defence budgets and planned German infrastructure investment. 'This should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag,' he said. Sign in to access your portfolio
