Eurozone composite PMI revised up, but output still declines as inflation rises

(Sharecast News) - Private sector activity across the eurozone contracted less than expected in May, according to revised figures from S&P Global on Wednesday, though still pointed to a steeper downturn than the previous month as inflation pressures picked up.

The final estimate of the S&P Global eurozone composite purchasing managers' index - a weighted average of the manufacturing PMI output index and the services PMI business activity index - came in at 48.5 for last month.

That's up from the preliminary reading of 47.5 published two weeks ago but down from April's 48.8 level, marking the lowest figure in 18 months.

This marked the second straight monthly contraction in private-sector activity as a whole and suggests that the eurozone economy could slip into contraction in the second quarter, according to S&P Global.

"The PMI data are indicating a 0.2% quarterly GDP decline barring any significant change in June," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

While the services PMI rose to 47.7 in May from 47.6 in April, it remained firmly below the neutral 50-point mark which separates growth from contraction, while growth in the manufacturing sector eased to 51.6 from a near-four-year high of 52.2 previously.

Weak demand weighed on overall output, with export markets particularly tough, as evidenced by the steepest fall in non-domestic new orders in five months.

Job losses also picked up during the month, while input cost pressures increased by their sharpest rate since late 2022. Output price inflation also accelerated for the third straight month.

"Price pressures have [...] intensified to their most worrying for over three years, hinting at inflation potentially running close to 4% in the coming months," Williamson said.

"These price pressures will sit uncomfortably with the ECB, which will want to be seen as acting swiftly to prevent higher inflation from becoming entrenched. However, policymakers will also clearly be concerned that they could be hiking rates into a downturn, adding to recession risks."