Economic activity in the euro area contracted in April, recording its first decline in 16 months, amid pressure from the conflict in the Middle East and the resulting increase in energy prices and disruption to global supply chains.
The euro area composite Purchasing Managers’ Index (PMI), issued by S&P Global, declined to 48.6 points this month, down from 50.7 points in March.
The report said the unexpected drop showed the euro area economy had entered a contraction phase after posting a reading above 50 in the previous month, a level that usually indicates expansion in economic activity, while a reading below that threshold signals contraction.
The decline was largely driven by a sharp fall in activity in the services sector, which posted its fastest contraction in more than five years. At the same time, the manufacturing sector continued to expand, with output rising at its quickest pace since last August. However, this was partly because customers placed extra orders to build up inventories ahead of expected price increases or possible supply shortages.
The report noted that the downturn was widespread across the euro area, with both Germany and France, the EU’s two largest economies, recording contractions in activity during the same month.
