Eurozone private sector growth almost stalled this month, a key survey showed on Tuesday, adding to evidence that the bloc is already feeling economic fallout from the U.S. and Israeli war with Iran, with inflation rising and growth slowing.
“The economic hit from higher energy prices could be felt very quickly,” Jack Allen-Reynolds at Capital Economics said. “Based on our working assumptions for energy prices, we suspect that the economy will stagnate rather than contract, but there are clearly risks in both directions.”
Interest rates are rising amid expectations of further European Central Bank rate increases to curb inflation, pushing some mortgage rates higher and denting disposable incomes.
Meanwhile, petrol prices have risen by more than 10% across the EU, while diesel is up over 20%. Even if the war ends relatively soon, prices are unlikely to fall quickly, as some energy infrastructure has been damaged and fuel bottlenecks may take several months to resolve.
The S&P Global flash eurozone Composite Purchasing Managers’ Index fell to a 10-month low of 50.5 in March, down from 51.9 in February, as the war drove input costs to their highest in more than three years and triggered the worst supply chain disruptions since mid-2022.
“The flash eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
The fall in the PMI comes as German figures held up relatively well, while other major economies took a bigger hit, including France, where business confidence tumbled.
Separate data released a day earlier showed consumer confidence in the bloc falling to its lowest level since late 2023, marking one of the steepest declines on record and dropping well below its long-term average as economic pressures weigh on households.
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Start your day informed with the AnewZ Morning Brief. Here are the top stories for 29 May, covering the latest developments you need to know.
France will become the first country in the European Union to reimburse anti-obesity drugs through its public healthcare system, Health Minister Stéphanie Rist announced on Thursday (28 May).
U.S. rapper Kanye West, now known as Ye, performed to a crowd of 118,000 people in Istanbul on Saturday night, marking his first concert in Europe in more than a decade, despite being barred from performing in several countries over past antisemitic remarks.
Okinawa lost transport links and suffered widespread power outages on Monday (1 June) as Severe Tropical Storm Jangmi brought destructive winds and heavy rain to Japan's south-western islands.
Donald Trump said he is “in no hurry” to reach a deal with Iran, insisting the U.S. is slowly getting what it wants. He warned military action remains an option if talks fail. Meanwhile, U.S. forces said they fired a missile at a vessel trying to breach Washington’s blockade of Iran.
U.S. Secretary of State Marco Rubio has held talks with Lebanese President and Israeli Prime Minister on efforts to ease tensions between Israel and Lebanon. According to a U.S. official, Washington has proposed a plan aimed at achieving a gradual de-escalation of hostilities.
The World Health Organisation’s designation of the Bundibugyo Ebola virus outbreak as a Public Health Emergency of International Concern (PHEIC) is a stark reminder that Ebola remains a persistent global health threat rather than a disease of the past.
Russian air attacks on major Ukrainian cities such as Kyiv, Dnipro and Kharkiv killed at least nine and wounded more than 60 early on Tuesday, authorities said, following days of warnings that Moscow was planning a major assault.
Chile's far-right President José Antonio Kast, who took office in March, promised a legislative agenda that prioritises fighting crime, cutting spending and boosting economic growth in his first national address on Monday.
An Iraqi man accused of helping plan attacks on behalf of the Iran-backed militia Kata'ib Hezbollah pleaded not guilty on Monday (1 June) to U.S. terrorism-related charges, declaring in a New York courtroom that he was innocent and describing the allegations against him as part of wartime context.
More than 1,500 pages of government documents relating to Peter Mandelson's appointment and tenure as UK ambassador to the U.S. have been published, revealing private exchanges with ministers, criticism of Prime Minister Keir Starmer and details of the vetting process that preceded his appointment.
The International Labour Organization (ILO) has withdrawn the appointment of a senior U.S. official to a top leadership role because of delays in U.S. payments, according to a statement published on Monday (1 June).
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