Private-sector output in the eurozone saw its first decline in five months in May 2025, hitting a six-month low, according to the latest HCOB Flash Eurozone Composite PMI Output Index.
The index stood at 49.5 in May, down from 50.4 in April, with the reduction in output driven by a drop in services activity, which fell at its fastest pace for 16 months.
Manufacturing production ‘rose modestly’, meanwhile, maintaining the same pace as in April.
Germany and France
In terms of the performance of Europe‘s biggest markets, Germany saw a decrease in business output in May, following four months of growth, meaning that Germany joined France in contraction territory – France has seen business activity decrease for nine consecutive months now.
The remainder of the eurozone outperformed that of its two biggest economies, registering ‘sustained’ growth, according to the report, however the pace of expansion was the slowest since January.
New business orders have now decreased on a monthly basis throughout the past year, with the latest decline the most pronounced since December 2024. New orders in manufacturing have stabilised, however.
Following two months of marginal increases, employment growth paused in May, the data showed – the services sector saw a slight rise in staffing levels, which was ‘cancelled out’ by a fall in the workforce in manufacturing.
Business confidence in the eurozone ticked down in May to sit at its lowest level since October 2023. Service sector confidence reached its second-lowest level since 2012 – excluding the COVID-19 pandemic period – while manufacturing confidence improved to its highest since February 2022.
‘Can’t find its footing’
“The eurozone economy just cannot seem to find its footing,” commented Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction.
“Do not blame US tariffs for this one. In fact, efforts to get ahead of those tariffs might partly explain why manufacturing has held up a bit better lately. Manufacturers have now increased production for the third straight month, and for the first time since April 2022, new orders did not decline. On the flip side, 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.
“While foreign demand for services is softening, it is the sluggish domestic demand that seems to be dragging the sector down.” Read more here.
