German voters head to the polls this weekend with the eurozone economy on its knees.
In just the latest sign of the malaise gripping the Continent, the closely watched purchasing managers’ index (PMI) of activity in the single currency bloc came in at 50.2.
That was only marginally above the cut-off line of 50 between growth and decline – and underlined the parlous state of the eurozone economy.
Germany, which holds elections tomorrow, clocked up 51, but in France the reading sank to a dismal 44.5 – the lowest since September 2023.
The findings suggest that Germany may at least be seeing signs of a recovery even as the economic crisis in France is deepening.
In Britain, the index of private sector activity dipped to a two-month low of 50.5 as companies slashed jobs and put up prices ahead of tax increases in April.
Under pressure: ECB boss Christine Lagarde (pictured) has indicated that inflation in the services sector must be brought under control before victory can be declared
Matthew Ryan, head of market strategy at global financial services firm Ebury, said the reports ‘point to stagnation’ in the UK and the eurozone.
Worryingly for both economies, prices are also rising, making it harder for central banks to cut interest rates to stimulate demand and boost growth.
Christine Lagarde, the president of the European Central Bank that sets interest rates in the eurozone, has indicated that inflation in the services sector must be brought under control before victory can be declared.
Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the PMI report shows ‘this is definitely not the case’.
He added: ‘Economic output in the eurozone is barely moving at all.
‘The somewhat milder recession in the manufacturing sector is only just being overcompensated for by the barely noticeable growth in the services sector.
‘There is certainly hope for a German government that will be able to act after the elections, which should also provide a positive impetus for the eurozone as a whole. However, this is offset by a relatively unstable situation in France and a US customs policy that is spreading uncertainty.
‘These figures therefore do not yet point to a recovery in the eurozone.’
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