(Alliance News) - Business activity in the eurozone was broadly unchanged at the start of the second quarter, with new orders falling and fading confidence weighing on the region's private sector, preliminary survey results from S&P Global showed on Wednesday.

The Hamburg Commercial Bank flash eurozone composite PMI output index slipped to 50.1 points in April from 50.9 in March, hovering just above the 50-point threshold that separates growth from contraction. It marked the lowest reading in four months and came below the FXStreet-cited consensus of 50.3 points.

The stagnation reflected a renewed downturn in services, where the business activity index dropped to 49.7 points from 51.0 in March - a five-month low and the first sub-50 reading since November.

In contrast, manufacturing output expanded for the second consecutive month, with the sector's output index climbing to 51.2 points from 50.5, the strongest result since May 2022.

The broader manufacturing PMI rose slightly to 48.7 in April from 48.6 in March, reaching a 27-month high and ahead of the FXStreet-cited consensus of 47.5 points.

Demand conditions weakened, with new orders falling for the 11th consecutive month and at the fastest pace so far this year. Export demand also fell, extending a decline that began in March 2022.

Business sentiment across the bloc dropped sharply, hitting its lowest level since November 2022. Confidence weakened in both services and manufacturing, with services sentiment falling to its lowest in nearly five years.

Employment stagnated after a modest rise in March. Manufacturing continued to shed jobs, offsetting slower hiring growth in services. Outstanding work volumes fell once again, extending the decline to 25 months in a row, although the pace of backlog depletion eased to an 11-month low.

Price pressures were mixed. Input costs rose at their slowest pace since November, but services continued to face sharp cost increases. Meanwhile, manufacturing input prices fell for the first time in five months, aided by softer energy and commodity prices.

Output price inflation slowed to a five-month low. While manufacturers raised prices at the fastest rate in two years, the pace remained modest. Services charge inflation eased, with France even seeing its first decline in selling prices in three months.

"Manufacturing seems to be holding up better than expected," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. "Despite tariffs, output rose for a second straight month and profit margins improved. But the services sector is stalling, and the drop in new business suggests weakness could persist."

"The higher fiscal spending on infrastructure in Germany and defence spending across Europe should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag," de la Rubia added.

Final eurozone PMI readings will be released on May 2 for manufacturing and May 6 for services and composite indicators.

The composite PMI is compiled from survey responses collected from a representative panel of around 5,000 companies in the manufacturing and services sectors of the euro area. The responses were collected between April 9 and 22. The flash estimate is based on approximately 85% to 90% of total monthly responses.

By Eva Castanedo, Alliance News reporter

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