Eurozone business activity contracts in May – PMI

Euro zone preliminary PMI surveys for May showed that bloc’s business activity unexpectedly slipped back into contraction this month.

Dominant services industry contracted in May, as index dropped to 48.9, the lowest in 16 months, from 50.1 previous month and strongly missing 50.7 forecast.

Manufacturing PMI rose to 49.4 this month, from 49.0 in April and slightly above 49.2% consensus, which boosts optimism, although indicator remains below 50 threshold that divides growth from contraction, since June 2022.

The same report showed that euro zone Composite PMI, which tracks activity in both services and manufacturing and seen as a gauge of growth, dropped to 49.5 this month from April’s 50.4 and under 50.7 forecast.

The index fell below 50 mark for the first time this year that generates an initial warning about the overall condition of business activity.

May reports add to concerns about the bloc’s economy which continue to struggle to gain traction and emerge from dangerous zone however, economists showed cautious optimism, particularly due to slight improvement in manufacturing sectors of Germany and France, Eurozone’s two largest economies.