Tuesday, May 27, 2025 7:10 AM EDT
Image source: Pixabay
The manufacturing sector is weathering the trade war storm quite well so far, but weaker services are a bigger concern for growth in the eurozone at the moment.
While the eurozone PMI deteriorated in May, the European Commission’s economic sentiment indicator actually picked up a bit compared to the April reading (up from 93.8 to 94.8). This was mainly due to a slightly more upbeat consumer, but industry sentiment also ticked up again.
At this point, the general response in May seems to be one of slight relief compared to April concerns. But given how fast sentiment changes related to trade war and broader geopolitical concerns, it is still hard to draw definitive conclusions around economic strength in the bloc. Overall, after a strong GDP figure in the first quarter, we expect growth to drop back to stagnation this quarter.
For industry, it is notable that improvements continue despite trade war uncertainty. In May, order books improved, stocks of finished products were reduced, and production increased. The manufacturing sector has seen output decline for a prolonged period, but current developments point towards the start of a slight recovery. The likelihood of that happening depends on whether the trade war escalates.
For services, the picture in recent months has weakened. Since March, confidence has trended at a notably lower level. This is not just related to pessimism, but the service sector also reports weaker demand and a slowdown in expected employment over recent months. That looks like a broader trend getting lost in the trade development headlines.
From a sectoral perspective, things don’t look strong for eurozone growth. The reliable service sector growth engine is sputtering, while the smaller manufacturing sector is showing the first signs of recovery just as the trade war brings huge uncertainty. Overall, this does not encourage expectations of a miracle upturn. Expect growth rates around zero for the coming quarters – something the eurozone has gotten painfully used to in recent years.
More By This Author:
FX Daily: Constrained Dollar, Global Euro? South Korean Sentiment Jumps Amid Optimism About Next Government Czech Consumers And Business More Upbeat, Industry Remains Muted
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
