In June 2025, the Eurozone’s final services PMI rose to 50.5, slightly higher than the preliminary reading of 50.0 and up from May’s 49.7. The composite PMI also increased to 50.6, indicating a small economic growth, although new business demand remains weak. Input price inflation dropped to a seven-month low, but concerns about costs continue. Since April, the services sector has not shown much growth, and overall expansion since mid-2021 has been below historical averages. Unlike previous downturns, businesses have avoided layoffs due to labor shortages after COVID-19, helping to keep consumer spending stable. In June, employment even increased, suggesting that a recession might be avoided.

Germany’s Economic Outlook

Germany may see some improvements due to a planned government stimulus package, which could aid the entire service sector and create positive forecasts for next year. However, expectations for the Eurozone overall remain below long-term averages. In June, sales prices in the services sector increased, and input costs continued to rise. Despite a decrease in services inflation, likely due to a stronger euro and US tariffs, it remains significant for the European Central Bank. The latest data shows modest improvement, with the Eurozone services PMI slightly surpassing the neutral level. The reading of 50.5 indicates the first expansion in several months. Although this increase is small, it suggests that activity is stabilizing. The rise in the composite metric supports a cautiously optimistic view. New order volumes are still low despite the increase, suggesting business confidence is fragile. This lack of demand growth indicates that the recovery is on shaky ground. Input cost inflation has eased slightly but has not disappeared. This slow change should guide our pricing strategies in future market positioning.

Employment Trends

What stands out is the strength in employment. Job numbers have increased, mainly due to ongoing labor shortages in the services sector. Unlike past downturns, businesses seem hesitant—or unable—to cut jobs in this environment. This stable employment may be why private consumption remains resilient, preventing consumer-facing sectors from declining further. Germany’s planned government spending package aims to boost domestic demand and appears to be a positive development. While the measures aren’t revolutionary, they could provide enough support to revive weaker parts of the economy. The policy includes targeted investments and incentives to enhance corporate sentiment and spending in business-to-business services. We should also note that sales prices are rising more rapidly. This increase in June is partly due to continued demand in niche service sectors and residual wage pressures. Although overall cost growth has slowed and the euro has strengthened against other currencies, the effects of tariffs—especially amid ongoing trade tensions—mean that price controls are still tight. Currently, expectations are lower than typical for a healthy services sector cycle. This reflects structural challenges and a cautious approach to monetary policy. Even as input costs decrease, there is limited transmission of those savings to consumers, suggesting that protecting margins remains a priority. Given the stagnant orders, persistent input costs, and upcoming government support, the environment remains uneven. Future strategies should reflect a cautious growth outlook. Rushing into aggressive reflation trades might be too soon. Instead, we should focus on areas with stronger pricing power or fiscal backing. There’s little margin for error. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now