The Eurozone composite PMI fell to 48.2 in April 2026, contracting for the third consecutive month, as Europe's economic outlook darkened amid rising energy costs, weak export demand and political uncertainty in key member states. Germany, the bloc's largest economy, saw its industrial production fall 2.8% year-on-year in March — the sharpest decline since the energy crisis of 2022.
Natural gas prices in Europe have climbed 35% since January 2026 as storage levels depleted faster than expected and new supply from Russia remained cut off. The European Central Bank, which had been cutting rates to support growth, faces a dilemma as renewed energy inflation threatens to push headline CPI back above the 2% target. ECB President Christine Lagarde signalled a pause in rate cuts pending clarity on the inflation trajectory.
The deteriorating European outlook has implications for Indian exporters, particularly in the IT services, pharmaceutical and engineering goods sectors which count European companies and governments as major clients. Currency weakness in the euro is also a headwind for Indian IT firms with significant euro-denominated revenues. Indian policymakers are watching Europe closely given the ongoing India-EU Free Trade Agreement negotiations.
