Business activity across the eurozone hit a 31-month low in May 2026, amidst growing cost pressures, new data from S&P Global has revealed.
S&P Global‘s Eurozone Composite PMI Output Index fell to 47.5 in May, down from 48.8 in April, signalling a second consecutive month of declining private sector activity.
The downturn was led by the services sector, where activity dropped to its weakest level since February 2021. The Services PMI Business Activity Index declined to 46.4 from 47.6 in April, a 63-month low.
Manufacturing output remained marginally positive, but growth slowed noticeably, with the Manufacturing Output Index easing to 51.0 and the headline Manufacturing PMI slipping to 51.4.
‘Severe toll’
“May’s flash PMI survey data show the eurozone economy taking an increasingly severe toll from the war in the Middle East,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence. “Output has now contracted for two successive months, with the rate of decline accelerating in May to its highest for just over two-and-a-half years.
“The survey data indicates that the euro area economy looks set to contract by 0.2% in the second quarter. Job losses are also starting to become worryingly widespread as business confidence in any swift turnaround in the adverse economic climate fades further.”
Middle East
As S&P Global noted, the worsening conditions reflect the mounting economic impact of the ongoing conflict in the Middle East, which has triggered another major energy shock for Europe.
Rising fuel and energy prices pushed input cost inflation to its highest level in three-and-a-half years, while companies also faced intensifying supply-chain disruptions.
France recorded particularly sharp declines in output during May, while Germany and the wider eurozone also remained in contraction territory. New orders across the private sector fell at the fastest pace in a year and a half, with export demand weakening again after a brief stabilisation in April.
“The region’s supply shock from the war is also intensifying, as indicated by increasingly widespread supply chain delays,” Williamson added. “Supply shortages threaten not only to constrain growth in the coming months but also have the potential to add further upward pressure to inflation.
“The rise in the survey’s price gauges already hints at inflation running close to 4% in the coming months which, combined with the growing signs of the region slipping into an economic downturn, creates a deepening dilemma for policymakers.” Read more here.
