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Recession in the eurozone deepens in May 2026, PMI falls to 46.4 points
PMI shows a deterioration in sentiment in the euro area
May’s flash PMI readings pointed to a weaker picture for the euro area economy. The services sector, which accounts for most of eurozone GDP, took the biggest hit. The index fell to 46.4 points from 47.6 points in April, its lowest level in 63 months.
PMI, or the purchasing managers’ index, shows whether companies are seeing an improvement or deterioration compared with the previous month. A reading below 50 points indicates a decline in activity. In May, manufacturing data in the euro area also worsened, although the scale of the changes was smaller than in services.
In the manufacturing sector, the index fell from 52.2 points to 51.4 points. It still remains above the 50-point threshold, but the level itself does not tell the whole story. The index can be pushed up by rising costs and longer delivery times, which do not necessarily signal stronger demand.
Costs rise, demand weakens
In its comment on the data, S&P Global pointed to a sharper decline in output, new orders and employment. Cost pressure remains the key problem. In May, prices in manufacturing rose at the fastest pace in 3.5 years, which boosted some of the index readings.
At the same time, longer delivery times for components were not the result of stronger demand, but of disruptions in global supply chains. This matters for how PMI is interpreted, because a higher reading does not always mean a healthy recovery. Sometimes it points more to supply-side strains.
Chris Williamson, chief economist at S&P Global Market Intelligence, said the May data show the increasingly serious impact of the war in the Middle East on the euro area economy. In his view, output had already been falling for the previous two months, and in May the pace of that decline was the fastest in more than 2.5 years.
Risk of a technical weakening in the economy
Williamson also said the euro area economy could shrink by 0.2% in the second quarter. That signals that weaker sentiment in services and manufacturing is starting to feed through to real business activity. In practice, that means fewer new orders, more cautious hiring and greater pressure on margins.
The report said the services sector was hit especially hard by rising living costs. Higher energy prices are curbing demand while also increasing businesses’ operating costs. In manufacturing, some companies were building up inventories as a precaution, worried about the availability of raw materials and components.
The PMI is a composite measure calculated from five components: new orders, output, employment, delivery times and stocks of purchases. The latest survey covered about 5000 companies in Germany, France, Spain, Italy, the Netherlands, Austria, Ireland and Greece. Final manufacturing data are due on 1 June, and services data on 3 June.
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