Soft On Most Counts

Research evidence excerpt

Soft On Most Counts

Update

June 23, 2026 11:15 AM GMT

Morgan Stanley Europe S.E.MEuro Area PMI | Europe Jens Eisenschmidt

Chief Europe Economist

Soft On Most Counts Jens.Eisenschmidt@morganstanley.comJean-Francois Ouvrard +49 69-21662817

Deputy Chief European Economist

Jean-Francois.Ouvrard@morganstanley.com +49 69-21662813

EA composite PMI rebounded in June (49.5 from 48.5). In recent Morgan Stanley & Co. International plc

years, PMIs below 50 have been consistent with positive EA Skander Garchi Casal

growth and we keep our forecast for 2Q26 EA GDP unchanged EconomistSkander.Garchi.Casal@morganstanley.com +44 20 7425-0034

at 0.15%Q. The print also suggest limited upside risks to the Chiara Zangarelli

inflation outlook. EconomistChiara.Zangarelli@morganstanley.com +44 20 7677-3644

June EA PMIs | A rebound, but still a low level : EA composite PMI printed at 49.5 Morgan Stanley Europe S.E.

Gabriela Silova

in June, up from 48.5 in May ( Exhibit 1 and Exhibit 2 ). The print came above

Economist

consensus (49.2) but below our more upbeat view (50.2). We see four main Gabriela.Silova@morganstanley.com +49 69-21662832

takeaways. First, over the recent years, PMIs below 50 did not necessarily come Claire A Thuerwaechter

with negative growth (see below). We think the available data (from the PMIs but EconomistClaire.Thuerwaechter@morganstanley.com +49 69-21662842

not only) is consistent with our EA forecast of 2Q26 growth at 0.15%Q (unchanged).

Second, while manufacturing is solid across Europe, services continue to look soft

on average. Third, the decline of services and manufacturing input and output prices

in June suggest inflationary pressures are contained. We flag however that

companies continue to report unusually long delivery times. Ultimately, that’s our