The eurozone economy is taking “an increasingly severe toll from the war in the Middle East,” S&P Global Chief Business Economist Chris Williamson said May 21 on release of the S&P Global Flash Eurozone PMI for May, which showed the sharpest drop in the Purchasing Managers Index (PMI) since October 2023. The composite output index dropped to 47.5 from 48.8 in April — its lowest reading in 31 months, and the sharpest monthly contraction since October 2023. Anything below 50 on the index indicates contraction; anything above, growth.
The war is named as the driver throughout Williamson’s commentary. “The service sector is being hit especially hard by the surge in the cost of living created by the war, notably via the demand-sapping impact of higher energy prices,” he said. “The region’s supply shock from the war is also intensifying, as indicated by increasingly widespread supply chain delays. Supply shortages threaten not only to constrain growth in the coming months but also have the potential to add further upward pressure to inflation.” Input prices rose at their fastest pace in three-and-a-half years. Williamson estimates eurozone inflation will run close to 4% in the coming months.
