The final composite output index reading for the Eurozone came in at 46 for May (consensus and preliminary readout: 45.9, April: 46.7), signalling the steepest rate of contraction in manufacturing and services production in the single currency area since June 2009.
The services PMI (purchasing managers’ index) slipped to 46.7 (forecast: 46.5) from 46.9, indicating that the sector has fallen into a steepening downturn, in tandem with the stronger decrease in the goods-producing sector signalled by Markit’s manufacturing data released last week. “Based on these numbers, it would not be surprising to see gross domestic product for the region contract by 0.5% in Q2, though an even steeper decline could be seen if the June data disappoint,” warned Markit chief economist Chris Williamson. May data pointed to a renewed slowdown in German service sector growth (PMI: 51.8, consensus and April: 52.2), marking the slowest pace of expansion since November 2011, while the corresponding index for France posted 45.1 (median analyst forecast and April: 45.2), the lowest reading in seven months. Italy saw its PMI edge up to 42.8 last month (consensus: 42, April: 42.3) as job shedding across the sector eased noticeably, but expectations regarding activity levels in the year ahead dropped to the lowest since December last year. Service providers in Spain (PMI: 41.8, forecast: 41.7, April: 42.1) reported that rates of decline in activity, new orders and employment all accelerated in May. “Companies report business activity to have been hit by heightened political and economic uncertainty, which has exacerbated already weak demand both in the euro area and further afield,” commented Williamson on the latest survey replies.