Eurozone PMI contracts faster in May as inflation pressures rise

Business activity across the eurozone contracted at its fastest pace in over two and a half years in May, according to a key survey, deepening concerns over the economic impact of the conflict in the Middle East. The flash Composite Purchasing Managers’ Index (PMI) compiled by S&P Global fell to 47.5 in May from 48.8 in April, marking its second consecutive month below the 50.0 threshold that separates expansion from contraction.

The downturn was broad-based, with new orders falling at their fastest pace in 18 months and employment declining for a fifth straight month. The services sector, which dominates the eurozone economy, was particularly hard hit, contracting at its sharpest rate since February 2021. Analysts pointed to a surge in the cost of living, driven notably by higher energy prices linked to the war, as a primary cause of weakening consumer demand.

The survey indicated a sharp divergence between the bloc's two largest economies. France experienced its most severe contraction since the COVID-19 lockdowns of 2020, with its composite PMI plunging to 43.5. Business confidence among French firms turned pessimistic for the first time in months. Germany’s economy also...