Euro Zone Economy: Fragile Gains Amid Weakened Demand

The euro zone economy expanded in April but growth slowed due to weakened demand and stagnation in the services sector. A survey showed variations across the region, with some countries performing better than others. Inflation eased with input costs and output charges cooling, possibly influencing future interest rate decisions.

The euro zone experienced a sluggish economic expansion in April as demand weakened and the services sector nearly stagnated, according to a survey by S&P Global. The HCOB Eurozone Composite PMI Output Index dipped to 50.4 from March's 50.9, hovering just above the contraction threshold.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, highlighted the tepid start to the second quarter despite growth in the first three months. Services PMI dropped to a five-month low of 50.1, barely above neutral, while optimism waned with the business expectations index falling from 57.8 to 55.1.

The report showed weakening demand across sectors, marking the 11th month of decline. Export orders fell, albeit slowly, while firms relied on backlogs for activity, and job cuts persisted, especially in manufacturing. Inflation decreased, with easing input costs and output charges potentially justifying future interest rate cuts by the European Central Bank.

(With inputs from agencies.)