Eurozone Business Confidence Improves, But Steep Factory Job Losses Show Manufacturing Strain

Factory job cuts hit their fastest pace in seven months even as services growth lifts overall eurozone confidence.

Euro zone business activity grew steadily this month as services expanded at the quickest pace in 1-1/2 years, while weak demand sent manufacturing back into contraction territory, a private survey showed.

The 20-nation bloc has shown economic resilience despite high global uncertainty since the start of the year, and improving business confidence suggests the momentum is likely to remain intact.

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The HCOB Flash Eurozone Composite PMI, compiled by S&P Global, declined slightly to 52.4 in November from a more-than two-year high of 52.5 in October, just shy of a Reuters poll forecast for 52.5 but marking its 11th consecutive month above the 50.0 mark that separates growth from contraction.

“Business sentiment has undoubtedly turned more optimistic over the course of the year, which has translated into sluggish economic growth so far. At the same time, global headwinds have not pushed the bloc into recession,” said Bert Colijn at ING.

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“While we expect activity to strengthen further in 2026, we remain cautious about translating improved sentiment into immediate, faster growth.”

The services PMI rose to 53.1 from 53.0 in October, its highest since May 2024 and better than 52.8 predicted in the Reuters poll.

But manufacturing activity contracted after remaining at the break-even point the previous month. The sector’s headline PMI declined to 49.7 this month from 50.0 in October, its lowest since June and below the Reuters poll prediction of 50.2. Weak demand led factories to cut jobs at their fastest rate in seven months.

In Germany, the bloc’s largest economy, private sector growth lost momentum in November on an unexpected contraction in the manufacturing sector and lower-than-expected growth in the service sector.

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But in France, business activity almost stabilised as growth in services nearly offset a sharper-than-anticipated shrinkage in manufacturing output.

In Britain, outside the European Union, business growth ground almost to a halt this month, as companies put their plans on hold before next week’s government budget.

Meanwhile, overall input costs rose at their quickest rate since March, but firms largely absorbed them. Output prices increased at their weakest pace in over a year.

Overall inflation in the shared-currency bloc has remained persistently around the European Central Bank’s 2% target. That, along with a steady economic outlook, is widely expected to keep key interest rates on hold for a long period.