Germany private sector contracts for second month in May

Germany's private sector contracted for a second consecutive month in May, according to a key business survey, signaling a rising risk of recession for Europe's largest economy as it contends with the economic fallout from the Iran war.

The flash Composite Purchasing Managers' Index (PMI), compiled by S&P Global, edged up to 48.6 in May from 48.4 in April. While this was slightly above analyst expectations, the reading remained below the 50 threshold that separates expansion from contraction. The index tracks the services and manufacturing sectors, which together account for more than two-thirds of the German economy.

Phil Smith, economics associate director at S&P Global Market Intelligence, said the data indicates the economy is on course to contract in the second quarter. The decline was led by the service sector, where business activity fell for a second straight month, though at a slower pace than in April. The services PMI rose to 47.8 from 46.9. Meanwhile, manufacturing activity stalled, with its index dropping to 49.9 from 51.4 the previous month.

Smith noted that in manufacturing, the boost from efforts by companies to build stocks and get ahead of price increases and...