Economic activity stagnated across the eurozone in April, a business survey found on Wednesday, as Donald Trump’s punishing tariffs and heightened policy uncertainty inflicted further pain on the bloc’s already anaemic economy.
The eurozone’s provisional composite Purchasing Managers’ Index (PMI), which measures overall activity in manufacturing and services across the single currency area, fell from 50.9 to 50.1 between March and April – only marginally above the 50-point mark separating growth from contraction.
Germany, the bloc’s largest economy, slipped into contraction territory for the first time in four months, with its composite PMI dropping from 51.3 to 49.7.
Activity in France, the euro area’s second-biggest economy, shrank for the eighth consecutive month, with the pace of contraction accelerating from 48.0 to 47.3.
Berlin and Paris both exhibited a “similar pattern” of general resilience in manufacturing together with a sharp decline in services, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which compiles the index together with S&P Global.
France’s “more pronounced” weakness is likely a result of the countries’ “contrasting political landscapes”, he added.
“In France, there is a constant risk of government collapse amid a fragile debt situation, while in Germany, there is a chance of having a functioning new government with significant fiscal leeway starting in May,” de la Rubia said.
However, de la Rubia pointed to European countries’ recent pledges to ramp up defence spending as one “positive factor” affecting future growth.
The recent drop in oil prices – driven by markets’ fears of a tariff-induced recession – has also been a “boon” for European manufacturers, he added.
EU exporters are currently subject to a 10% baseline US duty as well as 25% tariffs on cars, steel, and aluminium. Trump also recently suspended swingeing “reciprocal tariffs” on US trading partners for 90 days, including a 20% levy on EU exports.
The survey comes a day after the International Monetary Fund slashed its global growth forecast for 2025 and 2026, as it warned that Trump’s tariffs had caused the world to enter “a new era” of economic protectionism and political unpredictability.
The fund now expects the eurozone to expand by 0.8% this year and 1.2% in 2026 – 0.2 percentage points below its previous January forecast.
France’s expected expansion for 2025 was cut from 0.8% to 0.6%. Germany, which has been in a recession for the past two years and whose export-led industries are heavily exposed to global trade disruptions, had its projected growth rate cut from 0.3% to 0%.
(om)