Eurozone Business Contracts in April on Middle East War

Business activity across the eurozone contracted unexpectedly in April for the first time since late 2024, as the escalating war in the Middle East disrupted supply chains and drove up inflation, according to preliminary data released Thursday by S&P Global.

The flash composite Purchasing Managers' Index, which gauges output in manufacturing and services sectors, fell to 48.6 from 50.7 in March, slipping below the 50 threshold that indicates expansion. The reading marked the weakest performance in about 18 months and surprised economists, who had anticipated a slight dip to around 50. The downturn signals a quarterly gross domestic product contraction of 0.1 percent, reversing a modest 0.2 percent gain in the first quarter.

The services sector, a key driver of the region's recovery, bore the brunt of the weakness, with its PMI dropping sharply to levels not seen since early 2021. Businesses reported softer demand amid heightened uncertainty from the conflict, which has weighed on consumer spending and confidence. In contrast, manufacturing showed a modest uptick, with the sector's PMI rising to 52.2, its highest in nearly four years. However, analysts attributed this to...