An economic survey showed that private sector activity in the eurozone contracted in May at its fastest pace in 18 months. This downturn came amid declining demand for goods and services, alongside rising inflationary pressures that reached their highest level in more than three years, reflecting a broader deterioration in key economic indicators.
According to Reuters, the S&P Global Eurozone Composite Purchasing Managers’ Index (PMI) fell to 48.5 in May, down from 48.8 in April. This marks the lowest level recorded since November 2024, although the final figure was higher than the initial flash estimate of 47.5. The index remains below the 50.0 neutral threshold, signaling a solid contraction in business conditions.
Escalating price pressures
The survey data showed that weak demand led to a decline in overall output for the second consecutive month. Indicating continued pressure on the European economy, the services sector remained in contraction territory despite a slight improvement to 47.7 in May, compared to 47.6 in the previous month.
Concurrently, the data recorded a noticeable increase in price pressures, which reached their highest levels in more than three years. These elevated costs came in light of the compounding effects of war, high energy costs, and fractured supply chains, which further complicate the economic landscape across the region.
Read more: ECB Lagarde rejects eurozone stagflation fears despite rising growth, inflation risks
GDP impact and economic outlook
Estimates issued by S&P Global indicated that these current indicators suggest a contraction in the GDP of the Eurozone by 0.2 percent during the second quarter of this year, should current trends continue without a significant improvement in demand or price stability.
These data reflect the persistent pressures facing the European economy within an unstable global environment, as the structural challenges associated with high inflation and weak growth continue to intensify.
