The growth of the private sector of the Eurozone has suffered a sharp slowdown in March, since the war in the Middle East led i Costs of the production factors to highs of over three years and triggered the worst interruptions of the supply chain from mid-2022. This is according to the preliminary survey of purchasing managers conducted by S&P, the first investigation important to show theimpact on businesses of the war between the United States and Israel against Iran, which began on February 28,
In the Eurozone, the PMI has fallen to a 10-month low, raising the alarm about stagflation.
The S&P Global Composite Purchasing Managers index, which summarizes the situation in the whole the euro area, fell to 50,5 in March, from 51,9 in February, touching lowest in the last 10 months and disappointing the expectations of a survey Reuters which had forecast a more modest decline to 51,0. It has remained above the 50,0 threshold that separates growth from contraction for 15 consecutive months.
“Preliminary data for March show the first impacts of the war in the Middle East on growth, the question, the business confidence and, perhaps above all, on prices“, said Phil Smith of S&P Global Market Intelligence.
Growth has stalled as the new orders, a key indicator of the question, decreased for the first time in eight months, due to the weakness in the service sector. Manufacturing orders continued to expand, although the manufacturing production data fell to 51,7 from 51,9 the previous month.
“The preliminary Eurozone PMI is triggering the stagflation alarm, as the war in the Middle East pushes the rising prices and at the same time stifles growth“, said Chris Williamson, chief economist at S&P Global Market Intelligence.
Overall, i costs of production factors have increased to fastest pace since February 2023, with both the manufacturing and services sectors experiencing higher inflation. The acceleration was more pronounced in the manufacturing sector due to thesoaring energy prices and the blockage of supply chains due to the conflict. delivery time Manufacturing supplier prices have lengthened significantly, reaching their highest level since August 2022, mainly due to war-related shipping disruptions.
Employment has decreased for the third consecutive month, with job cuts concentrated in the manufacturing sector, where staffing levels have fallen every month since June 2023. Employment in the service sector increased marginally, but at the slowest pace since September.
La business confidence has collapsed at its lowest level in nearly a year, with the largest monthly decline since Russia's invasion of Ukraine in early 2022. Firms remained optimistic about production for the year ahead, but sentiment was below the series average. “Output growth slowed, approaching stagnation, due to the chalo of business confidence and deterioration of new orders“, added Williamson.
The survey data lead to the prediction of a slowdown in gross domestic product growth Eurozone GDP fell to a quarterly rate of just under 0,1% in March, with leading indicators suggesting a heightened risk of recession in the coming months. The situation varies from country to country.
Germany is keeping production high with ever-increasing orders. But the future is uncertain.
In Germany la production continued to grow, thanks to the fastest expansion of the manufacturing sector in the last four years with Manufacturing PMI rose to 51,7. selected producers recorded the third consecutive monthly increase in new orders, with the fastest growth in the last four years. In particular, it emerges that demand, in some cases, has increased thanks to companies that have brought forward purchases for fear of potential supply disruptions in the coming months. However, the production forecasts were revised downwards, which means the surge in manufacturing activity will likely be short-lived.
Meanwhile theinput price inflation, that is, the costs sustained by companies to acquire resources, raw materials, energy and services necessary for the production of goods, has risen tohighest level in the last three yearsManufacturing input costs rose at the fastest pace since October 2022.
The occupation It declined again in both sectors, although the overall pace of job losses eased, reaching the lowest level in three months. According to the survey, business expectations for the coming year fell to their lowest level in 11 months, but remained positive.
Overall, German private sector growth slowed to its weakest pace in three months in March, mainly due to the decline in the service sector which reached its lowest level in seven months, at 51,2. Germany's preliminary composite PMI fell to 51,9 in March, from 53,2 in February. Economists polled by Reuters had expected a reading of 52,0.
France: The erosion of the service sector and manufacturing continues
In France The French private sector contracted at its fastest pace since October, hit particularly hard by weak demand and customer caution ahead of local elections. Business activity service sector weakened further, with the flash services index falling to 48,3 from 49,6, the lowest level in the last five months. The manufacturing production declined again for the first time this year, with the related sub-index falling to 48,5 from 51,6, the lowest level in the last four months. Overall, the new orders decreased at the fastest pace since last July, while the international demand for French goods and services It fell at the fastest pace in 15 months, the survey found. The preliminary composite PMI fell to 48,3 in March, from 49,9 in February, deepening the contraction indicated by the reading below 50.
Le cost pressures have intensified significantly. Composite factor price inflation was the highest since November 2023, while delivery delays from suppliers were the most widespread in just over three years and manufacturers increased selling prices at the fastest pace since March 2023. business confidence has weakened significantly, reversing much of the improvement seen since early 2026 as companies cited risks to demand and inflation from the war in the Middle East.
UK: Biggest spike in production costs since 1992
British economic activity also grew at its slowest pace in six months in March, as the Middle East conflict triggered the biggest monthly acceleration in growth. skyrocketing production costs. since 1992. The preliminary composite PMI fell to 51,0 in March, from 53,7 in February.
“The war in the Middle East hit the UK economy in March, dampening growth and sending inflation soaring,” Williamson said.
The S&P Global Index of prices of production factors for British manufacturers, which measures the speed of cost increases, jumped to 70,2 in March, from 56,0 in February, the greater increase monthly since the pound left the European Exchange Rate Mechanism in 1992According to S&P, the increase in prices of fuel, transport and raw materials energy-intensive was the main cause.
Businesses said they increased prices at the fastest pace since April 2025, exacerbating the Bank of England's dilemma over whether to raise interest rates to contain inflation risks at a time when the economy is slowing. The U.S. Purchasing Managers' Index (PMI) is also on the agenda for Tuesday.
