EMU: PMI Composite Final

Highlights

The latest eurozone PMI data indicate that the eurozone economy remained under pressure in May 2026, with private sector activity contracting for a second consecutive month. The composite PMI fell from 48.8 in April to 48.5, its lowest level in 18 months, signalling a modest but accelerating decline in economic activity.

The downturn was largely driven by the services sector, where the services PMI remained below the 50-point expansion threshold at 47.7, despite a slight improvement from April. Weak domestic demand, elevated uncertainty, and declining export orders continued to weigh on business activity. Export demand was particularly weak, with international new orders falling at the fastest pace recorded so far in 2026.

Economic performance across the eurozone remained uneven. Germany and France were the primary sources of weakness, while Italy and Spain recorded modest growth, demonstrating greater resilience. A key concern is the resurgence of inflationary pressures. Input costs rose at the fastest rate in three-and-a-half years, while output price inflation reached a 38-month high. At the same time, firms reduced employment levels as falling demand led to increased spare capacity.

Although business confidence improved from April's low, optimism remains historically subdued. Overall, the data suggest a challenging environment characterised by weak growth, softening labour market conditions, and persistent inflationary pressures.

Market Consensus Before Announcement

The consensus looks for the composite unrevised at 47.5 and services at 46.4, very poor readings reflecting a big hit for the Eurozone from the energy price shock.

Definition

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Description

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

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