Our nowcasts for Q2 point to moderate growth in the Eurozone (+0.2% q/q) and France (+0.1% q/q). The Atlanta Fed's GDPNow suggests a rebound in US growth (+0.3% q/q) after the slight contraction in Q1.
The business climate is holding up. The composite PMI decreased (50.1) but remains in expansion area. The manufacturing index persists in negative territory but is getting better for the fourth month in a row. Expectations of activity in services fell sharply (53.1, the lowest level in five years).
The business climate remains fragile. The IFO index has been rising since the beginning of 2025, including in April (86.9, +0.2 pp m/m, historical average of 95.7). However, the economic outlook has darkened as a result of the trade tensions triggered by the protectionist shift in the United States. These tensions have now spread to the services sector (flash PMI down to 48.8 in April). Industry is showing signs of stabilisation, but the situation remains fragile.
Mixed business climate. A slight deterioration was noticeable in April (from 97 to 96), due to a decline in retail sales and a deterioration in construction activity to a new low. The manufacturing index benefited from a rebound in production, particularly in the aeronautics industry. Despite a slight improvement, the services index remains below its long-term average.
Business sentiment deteriorated sharply in April. Confidence in the services sector is at its lowest since October 2022, causing the economic sentiment index to plunge. Confidence in industry continues to deteriorate (-0.6pt m/m), also due to a decline in order-book levels.
Business sentiment remains buoyant. The European Commission's economic sentiment index has been rising for three months (103.8; +0.4 points m/m), driven by an improvement in industry (-4.2; +1.3 pt). Indices of production expectations for the months ahead and of stocks of finished products are improving.
Business climate is deteriorating: the services PMI (48.9) catch up the industrial PMI (45.4) in contraction territory in April, as does the composite PMI (48.2). The index of new export orders in the manufacturing sector (not taken into account in the calculation of the manufacturing PMI) plunges and approaches the lows reached during Covid.
A Downbeat Business Climate. The ISM Manufacturing index has declined for 4 consecutive months, and reached 48.6 in April (-0.2pp). Production, employment and new orders were all in contraction territory. The price-paid index (69.8) stood at its highest since 2022. Meanwhile, the ISM Non-Manufacturing index remained positive but slowed (50.8 in March vs. 54.1 in December 2024).
Services Driving Business Climate Up. Growth in activity resumed in April according to the Composite PMI (51.1, +2.2pp), supported by the Services PMI (52.2, +2.2pp). By contrast, the Manufacturing PMI remained in contraction territory (48.5, +0.1pp), penalized by the largest deterioration in new orders since February 2024.
Widespread deterioration. The official PMI for the manufacturing sector fell to 49 in April (from 50.5 in March) and the Caixin PMI fell to 50.4 (from 51.2 in March). The decline is widespread across all sub-components and heralds a significant slowdown in activity after the rebound in March. These are the immediate consequences of the new 145% tariffs imposed by the US on Chinese imports.
