Eurozone business activity ends 2025 weaker than expected, PMI shows

[BENGALURU] Eurozone business activity growth slowed more than expected at the end of 2025, as a contraction in manufacturing deepened while the expansion in the dominant services industry eased, a survey showed.

The common currency bloc remained resilient for most of the year, despite higher US tariffs and elevated global uncertainties.

But the HCOB Flash Eurozone Composite Purchasing Managers’ Index (PMI) compiled by S&P Global declined to a three-month low of 51.9 in December, from a 2.5-year high of 52.8 in November.

This was below a Reuters poll forecast of 52.7, but marked the first full calendar year since 2019 in which the index remained above 50 – a level that separates growth from contraction.

Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, said: “The weaker performance is primarily attributable to the German industry, where the downturn intensified. In France, on the other hand, there are signs of a cautious recovery in industry, although a single monthly figure should not be overrated.

“All in all, the runway into the new year seems pretty unstable.”

Manufacturing activity shrank for the second consecutive month. The sector’s headline PMI declined to 49.2 in December from 49.6 in November, its lowest since April, and below the Reuters poll prediction of 49.9.

An index measuring output, which feeds into the composite PMI, contracted for the first time in 10 months, and new orders declined at the quickest rate since February.

Services continued to do the heavy lifting, but growth in the sector slowed. The services PMI decreased to 52.6 from a 2.5-year high of 53.6 in November, also below the level of 53.3 predicted in the Reuters poll.

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“We expect the service sector to continue to play a stabilising role for the economy as a whole in the coming year. However, a real upturn will succeed only if the manufacturing sector regains its footing,” de la Rubia added.

Overall optimism about future activity declined to its lowest since May. However, firms expanded their workforces at a faster pace.

Meanwhile, price pressures increased, with input costs rising at the fastest rate since March, and output charges increasing at a quicker pace.

Headline inflation rose slightly recently but remained around the European Central Bank’s (ECB) 2 per cent target, likely keeping the central bank on the sidelines.

A separate Reuters survey showed the ECB is expected to keep rates on hold at least until 2027. REUTERS