Euro Zone's Fragile Growth: Services Sector Almost at a Standstill

The euro zone economy witnessed continued expansion in April, though at a slower rate, as demand weakened and the crucial services sector nearly stagnated, according to a recent survey. Compiled by S&P Global, the HCOB Eurozone Composite PMI Output Index slightly decreased to 50.4 from March's 50.9, barely staying above the threshold that separates growth from contraction.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted the slowdown in economic growth at the start of the second quarter, despite an increase during the year's first quarter. The services sector, a substantial component of the economy, practically stalled in April with its PMI dropping to a five-month low of 50.1.

Optimism among service firms further diminished, leading to a significant drop in the business expectations index, the lowest since late 2022. Demand has declined for 11 consecutive months, affecting both manufacturers and service providers, with new business shrinking further alongside a continued decrease in export orders. However, employment rose slightly in the services sector, countering job cuts in manufacturing.

(With inputs from agencies.)