The single currency zone has seen its factory activity levels slip for the fourth month in a row, according to new data from IHS Markit’s flash Purchasing Managers’ Index. The manufacturing PMI fell from the 47.9 recorded in April to 47.7 for this month. Slowing global demand, Brexit uncertainty and ongoing weakness in Germany are believed to have been behind the further drop into recession. Germany sparked further concerns about the state of its car industry, which has taken a toll in recent months from dented sales, as its manufacturing sector also declined for May.
The manufacturing PMI fell to 44.3 from the 44.4 in April.
It marks the fifth monthly reading in a row below the 50 mark that separates growth from contraction.
The flash services PMI fell to 55.0 from 55.7 in the previous month, its first drop after four straight rises.
German business morale also deteriorated more than expected this month due mainly to a plunge in services sector confidence, an Ifo Institute survey showed.
For the eurozone as a whole, business activity come in weaker than expected, attributed to the deepening contraction in factory activity.
IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), which is considered a good guide to economic health, only nudged up to 51.6 this month from a final April reading of 51.5.
Morgan Stanley economists wrote to clients: “It’s not only that current growth is brittle, as the surveys suggest.
“There are also downside risks to the outlook going forward.
“We expect a dovish message at the central bank’s June meeting.”
IHS Markit said the data pointed to eurozone GDP growth of 0.2 percent this quarter.
The eurozone manufacturing PMI means the sector would have a 0.1 to 0.2 percentage point drag on an economy currently being supported by a struggling services industry, IHS Markit said.
Bert Colijn at ING said: “Concerns about manufacturing persist.
“The service sector continues to keep the economy afloat but at a slightly slower pace.”
Growth in the bloc’s dominant services sector slowed and its flash PMI fell to 52.5 from 52.8.
New export business — which also includes trade between member countries in the bloc — among services firms was hurt by weaker global growth, trade tensions and Brexit.
The sub-index fell to 48.1 from 48.7, one of the weakest readings since IHS Markit began collecting the data in late 2014.
Last month, European Central Bank President Mario Draghi raised the prospect of more support for the struggling eurozone economy if its slowdown persists.