FX.co ★ Eurozone Private Activity Unexpectedly Contracts

The HCOB Eurozone Composite PMI declined to 49.5 in May 2025, down from 50.4 in April, defying market predictions of 50.7 and marking the first contraction in private sector activity for the year, according to preliminary estimates. This contraction impacted both sectors, with services activity slipping into decline (48.9 compared to April's 50.1), and manufacturing activity experiencing an accelerated drop (48.4 versus 49). The decline in new orders reflects clients' hesitance to commit to new business amidst concerns over potential US tariffs and EU countermeasures, compounded by the previous month's order front-loading. Despite these challenges, job creation remained relatively stable due to sustained demand from existing order backlogs. In terms of pricing, the manufacturing sector witnessed a decline in costs, whereas services experienced sharp cost increases. Looking ahead, the business confidence index has fallen to its lowest point in 19 months.