The flash purchasing managers’ indices for June, released on Tuesday, paint a sharply divided global economy. The S&P Global US composite PMI rose to 52.2, its highest in four months, driven by a manufacturing surge to 55.7—a four-year peak. In contrast, the eurozone composite edged up to 49.5 but remained below the 50 threshold that separates expansion from contraction, while the UK composite slipped to 49.4, a 14-month low. The data confirm that American activity is accelerating even as Europe’s private sector continues to shrink.

The divergence is rooted in the services sector. US services expanded at 51.3, but European services are in deep retreat: the UK reading of 48.7 was the weakest in three years, Germany’s services PMI fell at the fastest pace since 2022, and France’s sector contracted for a sixth consecutive month. Analysts in Frankfurt and London attribute the weakness to persistently high costs—especially energy—and eroded consumer confidence, both linked to the ongoing Middle East conflict. S&P Global’s chief business economist Chris Williamson noted that while more positive news from the region had restored some confidence among US firms, European consumer-facing services remain under severe pressure.

Manufacturing tells a different story. US factory output jumped as firms built safety stocks amid war-related supply worries, a temporary boost that Williamson warned “could soon falter.” German and French industrial readings also softened, with the eurozone manufacturing PMI dipping to 51.3. In the UK, stronger factory production partially offset the services slump, but new orders fell to a six-month low, suggesting the fillip from stockpiling is fragile. The Munich-based Ifo Institute estimates that the energy crisis triggered by the Middle East conflict will cost Germany €34 billion in 2026 and 2027 alone.

Political uncertainty compounds the economic picture. In London, the FTSE 100 fell to a one-week low and the mid-cap FTSE 250 dropped 1.8% as traders priced in at least one further Bank of England rate hike by December, following the resignation of Prime Minister Starmer and the expected coronation of Andy Burnham. Markets are also factoring in two additional quarter-point hikes from the US Federal Reserve under new chair Kevin Warsh. The next flash PMI releases and central bank policy meetings will reveal whether Europe’s contraction deepens or the transatlantic gap begins to close.