The eurozone’s private sector growth slowed sharply in March 2026 as the Middle East conflict drove up energy costs and disrupted supply chains, according to S&P Global data released March 24. Its flash PMI dropped to a 10-month low of 50.5 from 51.9 in February, signaling near-stagnation amid falling new orders.
S&P Global’s statement noted that a reading above 50 indicates expansion while one below signals contraction, placing the March figure at the edge of stagnation. The survey highlighted input costs rising at the fastest rate in more than three years alongside the worst supply chain disruptions since mid-2022. Business optimism remained subdued as both domestic and foreign demand weakened, the data showed.
In France the services sector weakened with the composite index falling to 48.3, its lowest in five months. Germany’s private sector index reached 51.9, supported by modest manufacturing gains, while manufacturing in Italy and Spain stayed below the 50 threshold indicating contraction. Greece was an outlier with moderate manufacturing growth, according to the S&P Global breakdown.
Overall manufacturing activity across the currency bloc edged up to 51.4 in March, helped by a recovery in German industry, S&P Global figures show. This came despite broader pressures from the conflict that has affected energy markets and logistics. The PMI data for February had shown an upturn with stronger growth signals before the escalation, a S&P Global report from that month indicated.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the flash PMI was ringing stagflation alarm bells. “The flash euro zone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” Williamson stated. A Reuters analysis published the same day pointed to tangible economic drag on the bloc from the conflict involving the U.S., Israel and Iran.
In the wake of the March data the European Commission revised its 2026 growth forecast for the euro area down to 0.9 percent, according to a May 2026 update from the commission. This adjustment reflected ongoing global uncertainties including the conflict’s economic ripple effects. Capital Economics noted later in March that the PMI falls and rising input prices pointed to slowing growth and higher inflation stemming from the Iran conflict.
The conflict’s impact extended to expectations of higher inflation with input prices surging, S&P Global data places the increases at multi-year highs. Supplier delivery times lengthened significantly adding to business costs across the region. Later PMI readings in May showed manufacturing at 51.6 indicating continued but slowing expansion according to S&P Global surveys compiled by Trading Economics.
