Germany Drives Europe's Manufacturing Revival Amid Services Struggle

Europe's economic recovery is gaining momentum, but it's not uniform across the region. Manufacturing is accelerating sharply, particularly in Germany, while services remain a drag on activity in several major economies.

The latest purchasing managers' surveys show that industrial investment and external demand are driving growth, with stronger export demand, defense spending, and investment linked to artificial intelligence and data centers helping factories regain momentum.

Germany is leading the recovery, with manufacturing orders and exports surging. France's economy remains in contraction, but its services sector is showing signs of stabilization. Britain's private sector expanded at its fastest pace since April, driven by services activity.

However, the services sector continues to struggle, with weak demand, uncertainty, and difficult operating conditions weighing on companies. Service-sector inflation remains a concern, with rising fuel and operating costs pushing service prices higher.