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Economic activity in the Eurozone slows down under the impact of the war in the Middle East

Affected by the war between the United States and Israel, the economic recovery momentum of the Eurozone has slowed down recently. Data released by S&P Global on the 24th showed that the Eurozone's Composite Purchasing Managers' Index (PMI) fell to 50.5 in March, significantly lower than the 51.9 last month.
Data show that the Eurozone's services PMI dropped sharply to 50.1 in March, hitting a new low since May last year. At the same time, new orders in the service industry fell for the first time in eight months, dragging down overall economic growth. In contrast, the manufacturing PMI rose to 51.4, performing better than expected.
The preliminary value of the Eurozone manufacturing PMI in March was 51.4, which was expected to be 49.4 and the previous value was 50.8. Germany's March manufacturing PMI preliminary value was 51.7, expected 49.5, and the previous value was 50.9. The initial value of the French manufacturing PMI in March was 50.2, compared with the expected 49.5, and the previous value was 50.1; the initial value of the service PMI in March was 48.3, compared with the expected 49, and the previous value was 49.6.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the energy shock caused by the war in the Middle East will significantly push up inflation and drag down economic growth in the euro zone, "sounding the stagflation alarm."
The European Central Bank recently predicted that conflicts in the Middle East may drag down economic growth in the euro zone and increase upward pressure on inflation. In 2026, the overall inflation rate in the euro area is expected to reach 2.6%, and the economy will grow by 0.9%.

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