Weakened service sector weighs on Eurozone economy - PMI
By Abigail Townsend
Date: Thursday 22 May 2025
(Sharecast News) - The Eurozone economy slipped into contraction in May, a closely-watched survey showed on Thursday, weighed down by a surprise slowdown in the service sector.
According to provisional estimates, the HCOB Eurozone composite PMI output index, which is compiled by S&P Global, fell into negative territory for the first time in five months, easing to 49.5 from 50.4.
Analysts had been looking for marginal growth to around 50.7.
A reading above the neutral 50.0 benchmark indicates growth, while one below it suggests contraction.
The index was dragged lower by weakness in the bloc's dominant services sector, with the PMI business activity index falling to a 16-month low of 48.9 from 50.1 in April. It was also well below expectations for 50.3.
In contrast, the manufacturing PMI output index was unchanged at 51.5, while the manufacturing PMI edged up 0.4 points to a 33-month high of 49.4.
Among individual countries, Germany's composite PMI output index fell to 48.6 from 50.1, as services fell to 47.2 from 49.0.
In France, the composite PMI output index nudged up 0.2 points to 48.0.
Looking ahead, and business confidence across the Eurozone weakened, and now stands at the lowest since October 2023.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: "The Eurozone economy just cannot seem to find its footing. Since January, the PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction.
"May's snapshot is not pretty.
"However, there are reasons for confidence in the longer term. The recovery in manufacturing is broad based, with encouraging signs coming out of both Germany and France. Further interest rate cuts could provide a boost, and lower oil prices compared to last year are also helping."
Berenberg said the data highlighted a "sluggish manufacturing sector and a further loss of momentum in services".
It continued: "Germany's services PMI fell sharply. Although this is consistent with the seasonal patterns we have seen in recent years, and as such may have to be judged with some care, it's a weak survey all the same."
ING said: "The trade war is weighing on the Eurozone economy, but likely mostly through the uncertainty channel rather than direct trade effects so far.
"The service sector, which has seen solid growth over recent years as manufacturing contracted, continues to slide, according to the survey, which could well be related to high uncertainty and adds fuel to further growth concerns."
Data were collected between 12 and 20 May.
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