Eurozone March PMI drops to a 9-month low, Middle East conflict pushes up energy costs, threatening economic growth

Tongtong Finance App News—— According to Tongtong Finance App reports, data released by S&P Global on the 7th day of the month shows that, driven by factors such as Middle East hostilities pushing up energy costs and disrupting supply chains, economic activity in the eurozone’s private sector has significantly slowed in March. The data show that the final value of the eurozone’s March composite Purchasing Managers’ Index (PMI) fell from 51.9 in February to 50.7, the lowest level in nine months. By industry, the eurozone’s March services-sector PMI final value slid from 51.9 in February to 50.2, the lowest level in 10 months. The survey’s chief business economist, Chris Williamson, believes that the March PMI data indicate that the Middle East hostilities have dealt a severe blow to the eurozone economy. He said that, due to factors including a surge in energy prices, supply-chain disruptions, volatility in financial markets, and a renewed drop in demand, the growth signs that had emerged at the start of the eurozone this year are no longer present, and the rise in prices has also raised concerns that stagflation could emerge in the short term—or even worse outcomes. Chris Williamson further said that unless the Middle East conflict is resolved quickly, the eurozone economy could face contraction risk in the second quarter of this year; even if the conflict ends rapidly, the destructive impact of the fighting on energy markets may continue for several months.

This data change reflects how quickly external shocks are transmitting to the eurozone’s real economy. As a leading indicator, a PMI above 50 signals expansion, while below 50 indicates contraction. Although the March composite index still remains just above the break-even line, it has moved close to the key threshold, showing that the momentum for expansion has clearly weakened. The decline in the services index is even more pronounced, indicating that consumer and services demand has softened under the impact of rising energy costs and uncertainty; while manufacturing was not listed separately, the knock-on effects from supply-chain disruptions have already spilled over into the overall private sector.

At the macro level, the Middle East conflict directly drives up crude oil and natural gas prices, causing companies’ production costs to rise sharply. At the same time, disruptions to logistics and raw-material supply chains further squeeze companies’ profit margins and suppress growth in new orders. The volatility that follows in financial markets also increases companies’ hesitancy to invest, while consumer confidence declines in tandem, creating compounded pressure from demand contraction and rising costs. Signs of “stagflation” are testing how much room eurozone monetary policy has to maneuver: if central banks keep current interest rates to curb inflation, growth slowdown could worsen; if they ease early, it could also fuel expectations of higher prices.

To present the recent PMI changes more intuitively, the following table shows key comparison data:

The table clearly shows that both dual indicators fell sharply in March, with the drag from the services sector proving even more prominent, highlighting the intensity of the conflict’s impact on non-manufacturing areas.

Overall, the results of this survey not only quantify the short-term negative impact of external geopolitical risk on the eurozone economy, but also provide important reference for subsequent policy formulation and adjustments to market expectations. Investors should continue to monitor the trend in energy prices, developments in the Middle East situation, and the European Central Bank’s subsequent interest-rate decisions to assess whether the second-quarter economy will enter a contraction range, as Chris Williamson warned.

Editor’s Summary

S&P Global’s March PMI data show that the Middle East conflict is creating substantial pressure on the eurozone economy through energy and supply-chain channels, with early-year growth momentum quickly reversing. Against the backdrop of rising stagflation risks, the eurozone needs to seek a more precise balance between stabilizing prices and supporting growth; over the coming months, the pace of conflict resolution and the extent of repair in energy markets will be key variables determining the direction of the economy.

(Responsible editor: Wang Zhiqiang HF013)

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