Eurozone struggles to ignite business activity in June

Eurozone business activity remained unchanged in June, with a PMI of 50.2 points. The stall in business activities has been linked to the region’s weak manufacturing and service industries. Germany, the largest economy in the area, posted 50.4 points, up from 48.5 points in May, attributed to high demand in the manufacturing sector.

Private sector business activities in the eurozone are still struggling to recover, with the latest Purchasing Manager’s Index (PMI) data indicating stagnation in both the services and manufacturing sectors.

The PMI remained unchanged from May, posting a 50.2 points PMI slightly below market expectations of 50.5 points and barely above the 50 mark that separates growth from contraction. The services industry jumped as expected to 50 points from 49.7, manufacturing PMI remained unchanged at 49.4, and the forecast rose to 49.8 points.

Business activity stalls in the eurozone despite easing financial conditions

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said that the eurozone economy has struggled to gain momentum for six months. He revealed minimal growth, with activity in the services sector stagnating and manufacturing output rising only moderately.

Business activities in the region remained unchanged despite a more accommodative monetary stance by the European Central Bank (ECB). The ECB has recently reduced its deposit facility rate by 25 basis points to 2.00%.

The regional disparities are becoming more pronounced, with Germany, the largest economy in the region, showing a marginal return to growth. The flash composite PMI rose to 50.4 in June from 48.5 in May. The rise was triggered by increased demand in the manufacturing sector, the fastest rise over three years. De la Rubia said there is a good chance that Germany would finally break out of the stop-start growth pattern after two years of being stuck in it. 

The German services sector PMI rose to 49.4 in June 2025, up from 47.1 in May, which surpassed market expectations of 47.5. The data showed a slight increase in activity, which marked a change from the three-month downturn, mainly affected by the Trump tariff wars.

However, Germany continued to record a downward trajectory with the composite PMI dropping to 48.5 in June from 49.3 in May. That is the tenth consecutive monthly decline.

Manufacturing and services business activities declined, with firms citing low domestic demand, intensifying international competition, and uncertainty surrounding global trade. Sales fell sharply for the thirteenth consecutive month in June, with factory orders declining sharply, last seen in February.  

Markets remain uncertain in the eurozone 

Jonas Feldhusen, Junior Economist at HCOB, said the outlook is certainly clouded. According to him, the question arises whether the decline in manufacturing output this month represents a temporary dip or marks the end of the upward trend.

Persistent cost increases in services and renewed geopolitical tensions may further discourage monetary easing in the coming months despite easing inflation pressures in the goods sector. Markets expect the ECB to hold its interest rate benchmark steady at 2.00% during the next policy meeting on 23-24 July. 

U.S. strike on Iran over the weekend added to the volatile economic landscape with renewed fears of a long-term conflict in the Middle East. The war can potentially trigger oil prices since at least 20% of global crude oil shipments pass through the Strait of Hormuz. 

Trump’s 90-day pause on a reciprocal tariff truce is set to expire on 9 July, creating more uncertainty in the region. Negotiations are still ongoing, although Europe has not secured a trade agreement to avoid another wave of disruptions in business activities. 

Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot