Eurozone Private Sector Shrinks For First Time In 5 Months

(RTTNews) - The euro area private sector logged a renewed fall in May due to a sharp downturn in services activity, flash purchasing managers' survey compiled by S&P Global showed on Thursday.

The flash HCOB composite output index fell to 49.5 in May from 50.4 in April. The score fell below the 50.0 no-change mark for the first time in five months.

The reduction in output was centered on the services sector as manufacturing production rose moderately in May.

At 48.9, the services Purchasing Managers' Index was down from 50.1 in April. The score was forecast to rise to 50.4. On the other hand, the flash factory PMI climbed to a 33-month high of 49.4 from 49.0 in April.

"The eurozone economy just cannot seem to find its footing," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

The economist said this decline was not due to the US tariffs. Service providers, who are generally less exposed to US trade policy, except in areas like international logistics, are seeing business activity shrink for the first time since November 2024, de la Rubia said.

The survey showed that new orders decreased at the most pronounced pace since December. Manufacturing orders stabilized in May, ending a three-year period of decline. Meanwhile, orders in services dropped for the fourth straight month.

Employment remained unchanged as a slight rise in services staffing levels was cancelled out by a moderate fall in manufacturing workforce numbers.

At composite level, input costs increased at a broadly similar pace to that seen in the previous month. Meanwhile, output price inflation eased to a seven-month low in May.

Business confidence moderated to a 19-month low in May and was also weaker than the series average.

Further, the survey showed that output in Germany decreased, after activity had risen in each of the opening four months of the year. The fall meant that Germany joined France in contraction territory.

By contrast, the rest of the euro area continued to outperform the largest two economies, registering sustained growth.

The German private sector activity contracted the most in five months in May due to a deepening downturn in the service sector. The HCOB composite output index fell to 48.6 from 50.1 in April.

The services PMI hit a 30-month low of 47.2 in May, down from 49.0 in the previous month. At 48.8, the manufacturing PMI reached a 33-month high and up from 48.4 a month ago.

France's private sector economy remained in contraction territory in May, extending the current downturn to nine months. The HCOB composite output index recorded 48.0 in May, up from April's 47.8.

The services PMI rose marginally to 47.4 from 47.3 in April. The factory PMI rose more sharply to 49.5, a 28-month high, from 48.7 in the previous month.