Euro zone business activity ends 2025 weaker than expected, PMI shows

By Indradip Ghosh

BENGALURU, Dec 16 - Euro zone 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 U.S. tariffs and elevated global uncertainties.

But the HCOB Flash Eurozone Composite PMI, compiled by S&P Global, declined to a three-month low of 51.9 this month from a 2-1/2-year high of 52.8 in November.

That was below a Reuters poll forecast for 52.7 but marked the first full calendar year above the 50.0 level that separates growth from contraction since 2019.

"The weaker performance is primarily attributable to 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," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"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 this month 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 2-1/2-year high of 53.6 in November, also below 53.3 predicted in the Reuters poll.

"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 only succeed 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 quicker pace.

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

Headline inflation has risen slightly recently but has remained around the European Central Bank's 2% 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.