Eco Pulse

Eurozone: Indicators stable, inflation under control

07/08/2025
PDF

Business climate: PMI

Stable business climate. The composite PMI index was stable at 50.2 in June, remaining above the expansion threshold in the first half of the year. The upturn in the manufacturing index slowed but continued (+0.1 pt to 49.5). It was driven in particular by new orders, with the index back above the 50 threshold for the first time in three years. The services PMI is unchanged.

Household confidence

Household confidence fell slightly in June, but remains well below its long-term average. Nevertheless, retail sales are showing an encouraging trajectory (+0.1% m/m in April and +1.8% in 3m/3m annualised). The momentum is particularly strong in France (+3.1%, 3m/3m annualised), Belgium (+8.1%) and Portugal (+3.9%).

Labour market: Unemployment rate

The labour market remains resilient. The unemployment rate nevertheless rose to 6.3% in May (6.2% in April), driven up by Italy (+0.4 pp to 6.5%), while it remained stable in Germany (3.7%) and France (7.1%). Wage moderation continues, with the ECB's wage tracker pointing to an increase in basic wages of 3.0% y/y by the end of 2025.

Inflation (y/y) and policy rate

Inflation remains firmly anchored on the ECB's target. The harmonised index rose by 2% y/y in June (preliminary figure), compared with 1.9% in May. Core inflation is stable at 2.3%, with the strengthening in services (+0.1 pp to 3.3% y/y) being offset by the decline in non-energy industrial goods (-0.1 pp to 0.5%). Against this backdrop, we expect the ECB to cut its key rates by a final 25bp in September.

GDP growth q/q: actual, carry-over and forecasts

Backlash against growth in Q2? After a Q1 2025 boosted by exports in anticipation of the rise in US tariffs, a fall back is expected in Q2. According to our nowcast, which does not incorporate the fallback but tracks the economy's trend growth rate, the latter remains solid (+0.3% q/q). It should be underpinned by a final interest rate cut in September and by increased defence spending for the region's rearmament. In May, growth in outstanding loans to businesses slowed, while growth in loans to households continued to accelerate. This was mainly due to the stabilisation of rates on new business investment loans, while rates on loans to households fell again.

Article completed on 3 July 2025

THE ECONOMISTS WHO PARTICIPATED IN THIS ARTICLE

Other articles from the same publication

Global
Ecopulse | July 2025

Ecopulse | July 2025

Our Q2 2025 nowcasts highlight the resilience of the Eurozone and, to a lesser extent, France. Weaker exports (after their surge in Q1 in anticipation of the US trade tariffs) penalises our forecast in Q2 [...]

Read the article
Eurozone
Credit in the Eurozone: Slowdown in corporate lending, acceleration in household lending

Credit in the Eurozone: Slowdown in corporate lending, acceleration in household lending

The decline in borrowing rates in the Eurozone resumed, except for investment loans. New investment loan rates (IRF > 5 years) to non-financial corporations in the eurozone remained stable in May 2025, at 3.67%, for the third consecutive month [...]

Read the article
Germany
Germany: economic recovery continues

Germany: economic recovery continues

The IFO business climate continues to improve (+0.9 points in June compared to the previous month, to 88.4), supported by favourable economic prospects [...]

Read the article
France
France: Decline in private sector confidence

France: Decline in private sector confidence

Business climate: improvement confirmed in construction. The business climate continues to be quite low, with 96 in June and in May (97 in March-April) [...]

Read the article
Italy
Italy: Business climate on the rise, household confidence down

Italy: Business climate on the rise, household confidence down

Business climate: the improvement continues. The economic sentiment index has been improving for two months, reaching 98.6 in June (+0.2 points m/m) [...]

Read the article
Spain
Spain: Economic momentum remains strong

Spain: Economic momentum remains strong

Business climate: favourable, but slightly weaker. In June, the economic sentiment index remained above its long-term average and that of the Eurozone, but weakened for the second consecutive month (102; -1.4 points m/m) [...]

Read the article
United Kingdom
United Kingdom: Surveys show improvement, but employment stalls

United Kingdom: Surveys show improvement, but employment stalls

Business sentiment improves in all sectors: The composite PMI index rises in June (+1.7 points, to 52), driven by both services (+1.9 points, to 52.8) and industry (+1.3 points, to 47.7) [...]

Read the article
United States
United States: Improvement in the Business Climate

United States: Improvement in the Business Climate

Improvement in the ISM. The manufacturing ISM improved modestly (49.0, +0.5 pp) in June, with a notable jump in output (50.3, +4.9 pp), which entered expansion territory for the first time since February [...]

Read the article
Japan
Japan: Improvement in the Business Climate

Japan: Improvement in the Business Climate

Favourable developments for the business climate. The manufacturing PMI stood at 50.1 in June (+0.7 pp, the first expansion posted since May 2024) thanks to growth in output (51.2, +2.5 pp). The services sector also improved (51.7, +0.7 pp) [...]

Read the article
China
China: Moderate slowdown in exports and fiscal support

China: Moderate slowdown in exports and fiscal support

Trade truce. The official PMI for the manufacturing sector has been in contraction territory since April, mainly due to the US-China trade war and worsening export prospects. However, the index rose slightly from 49 to 49.5 in May and 49 [...]

Read the article