Economic expansion in the eurozone’s private sector slowed to its weakest pace in nine months in March, according to the latest PMI survey released Tuesday by S&P Global, as incoming orders declined and input costs climbed to their highest level in more than three years.
The S&P Global Eurozone Composite PMI Output Index slipped to 50.7 in March from 51.9 in February, signalling the slowest rate of growth since June 2025. Although the figure remained above the 50 mark that separates expansion from contraction, it was well below the long-term average of 52.4.
The deceleration was largely driven by the services sector. The Services Business Activity Index dropped to 50.2 from 51.9 the previous month, reaching its lowest level in ten months. By contrast, manufacturing output continued to show solid growth.
Among the largest eurozone economies, Spain recorded the strongest expansion in March, with growth accelerating. Ireland followed, although its growth rate eased to a six-month low. Germany also remained in expansion territory, but activity grew at the slowest pace of the year so far. Meanwhile, France and Italy both recorded declines in activity.
Across the eurozone, total new orders fell in March for the first time since July 2025, largely reflecting weaker demand for services. Export orders—including trade within the euro area—also declined, though the pace of the drop remained modest.
Employment in the private sector edged lower during the month, marking the sharpest reduction in payrolls in 13 months. The decline was mainly linked to a stronger fall in manufacturing jobs.
Cost pressures increased sharply. Input price inflation rose to its highest level in just over three years, with manufacturers reporting a record one-month jump in their input price index, which climbed nearly 11 points compared with February. Service providers also reported steep increases in operating costs.
Companies raised their selling prices at the fastest pace since February 2024, although the rise in output prices was still smaller than the surge in input costs.
Business sentiment weakened as well. Overall optimism among firms declined for the first time since December 2025 and fell to its lowest level in almost a year.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the March PMI figures show that the eurozone economy has been significantly affected by the conflict in the Middle East. “The encouraging signs of growth seen earlier in the year have been eradicated thanks to surging energy prices, choked supply chains, financial market volatility and a renewed downturn in demand,” Williamson said.
According to Williamson, the survey data point to eurozone GDP growth of around 0.2% in the first quarter. However, he warned that the region could face a contraction in the second quarter unless the conflict is resolved quickly.
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