Eurozone manufacturing activity remained in expansion territory in May, but momentum declined as higher energy costs and supply disruptions linked to the conflict in the Middle East began to weigh on the sector. The manufacturing PMI closed at 51.6, down from 52.2 in April, while the production index fell from 52.3 to 51.3. Although the numbers represent the fourth straight month of expansion, they also indicate that the recovery is losing some steam as inflation pressures intensify.
According to S&P Global’s chief business economist, Chris Williamson, manufacturers are increasingly suffering under the impact of rising input costs and deteriorating supply chain conditions. He noted that energy and raw material prices rose again in May, leading to the largest monthly increase in production costs in four years.
Meanwhile, supply chain delays rose to their highest level since pandemic-related disruptions in 2022, increasing pressure on companies. Williamson warned that factories are being forced to pass on higher costs to customers, a process that will “inevitably lead to higher inflation in the coming months.”
The challenge for policymakers is that inflation and growth signals move in opposite directions. While higher costs strengthen the case for further ECB tightening, demand is already showing signs of fatigue. After three months of improvement, order books stalled in May, as customers became more cautious in response to higher prices.
| index | former | Latest |
|---|---|---|
| Manufacturing Purchasing Managers Index (PMI). | 52.2 | 51.6 |
| Purchasing Managers’ Index (PMI) Manufacturing Output. | 52.3 | 51.3 |
The full final release of the Eurozone Manufacturing PMI is here.
