Eurozone Private Sector Growth Stalls Amid Geopolitical And Trade Uncertainty

According to Bloomberg, in June 2025, the Eurozone economy showed little progress, remaining near stagnant levels for the sixth month. S&P Global’s Composite Purchasing Managers’ Index (PMI) recorded a reading of 50.2, just above the neutral level. This neutral mark of 50 is the dividing line between economic expansion and contraction in PMI data. Economists had forecast a rise to 50.5, but the actual figure fell short of that expectation. Within the breakdown, services returned to 50, while manufacturing continued to decline, staying at 49.4. “The euro-zone economy is struggling to gain momentum,” said Cyrus de la Rubia of Hamburg Commercial Bank. “For six months now, growth has been minimal,” he added, pointing to persistent signs of stagnation.

US Policies and Geopolitical Conflicts Increase Economic Uncertainty

These PMI results suggest that the second quarter of 2025 will bring little to no economic growth. Recent US policies under President Donald Trump have further added to the complexity of the global economic environment. In particular, changes in trade strategy and foreign relations have increased unpredictability in financial markets. The conflicts in the Middle East have added another layer of concern and could contribute to market volatility in the coming weeks.

National PMI Data Reveals Divergent Trends in Germany and France

Looking at national PMI data reveals mixed results within major Eurozone economies. Germany, the region’s largest economy, showed signs of recovery and returned to moderate growth. France continued to contract, staying below the 50 mark for the ninth consecutive month. “The euro area’s second-biggest economy continues to drag its feet,” de la Rubia said in the report. Such divergence between major economies complicates efforts to achieve consistent growth across the euro area. These differences in performance reflect deeper structural and sectoral issues in national economies. They also show how uneven recovery can be, even within a closely integrated economic zone.

Private sector growth outside the Eurozone continues to contrast with its sluggish performance. PMI figures earlier this month showed expansion in Japan, India, and Australia across both manufacturing and services. Those countries benefited from strong domestic demand and steady international orders during the same period. In the Eurozone, services saw their first decline in activity since November 2024. Export orders dropped at their fastest rate since the end of last year, reducing work backlogs. Falling demand also affected employment, as companies became more cautious about hiring in response to weaker sales.

ECB Projects Modest Growth and Considers Pausing Interest Rate Cuts

The European Central Bank (ECB) expects the Eurozone economy to grow by only 0.9% in 2025. Despite inflation falling in recent months, the ECB may hold off on more interest rate cuts. Some officials believe that the current cycle of easing could be nearing its natural end. “The ECB can remain relatively calm,” said de la Rubia, discussing monetary policy expectations. He noted that a strong euro and the deflationary effects of US tariffs limit inflationary risks. 

Political Tensions and NATO Spending Raise Economic Concerns

These economic readings arrive during politically sensitive talks among European leaders in The Hague and Brussels. Near the top of the agenda is increased NATO defense spending and its budgetary consequences. PMI readings remain a useful tool for investors and analysts alike to quantify current business conditions. But PMI readings measure business activity changes, not the size or value of economic output. This means their direct relationship with GDP growth remains limited in precision. Now, the Eurozone economy faces internal structural problems and growing external geopolitical risks. These combined factors continue to limit any profound or broad-based recovery across the private sector.