Eurozone Business Activity Contracts: May 2025
Originally published 2025-05-22. Translation and editorial review: 14 October 2026. Market figures refer to the original reporting period.
In May 2025, the Eurozone economy faced an unexpected contraction in business activity. The combined Purchasing Managers' Index (PMI) compiled by S&P Global and Hamburg Commercial Bank (HCOB) fell to 49.5 from 50.4 in April. This is below the 50 level that indicates economic expansion. Reuters www.reuters.com
The service sector has suffered a severe recession.
The contraction was mainly pressured by the services sector, with the Services PMI falling to 48.9, the lowest level since January 2024, reflecting weak demand and customer uncertainty in key markets such as Germany and France.
The manufacturing sector shows slight signs of recovery.
On the other hand, the manufacturing sector showed signs of recovery, with the Manufacturing PMI rising to 49.4 from 48.8 in April. and the output index held steady at 51.5, supported by lower product prices and lower energy costs. Reuters www.reuters.com
Business confidence has dropped.
Business Expectations Index fell to 54.0, the lowest level in nearly three years. Reflects the business sector's concerns about future economic trends.
Market Reaction and Monetary Policy
The contraction in business activity led to a decline in European stock markets, with the STOXX 600 index down 0.8%. Investors are concerned about US fiscal policy. and rising debt from President Donald Trump's proposed tax cuts, which has led to U.S. bond yields Rising to the highest level in three months.
The European Central Bank (ECB) has cut interest rates several times. And the market expects another interest rate cut to 2.00% in early June. To stimulate the slowing economy. Reuters www.reuters.com
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