Eurozone Private Sector Activity Contracts at Fastest Pace in 18 Months as Services Slump

Eurozone private sector activity contracted in May at the fastest pace in 18 months, according to the latest flash survey from S&P Global, signaling a renewed slowdown in the bloc’s economy. The decline was driven largely by weakening demand for goods and services, with the services sector taking the hardest hit.

The S&P Global Eurozone Composite Purchasing Managers’ Index fell to 47.5 in May from 48.8 in April, well below the 50 mark that separates expansion from contraction, as reported by RTE and S&P Global. That reading pointed to the second straight month of private sector contraction and the sharpest overall downturn since October 2023.

Services activity, which makes up the largest share of eurozone economic output, fell to 46.4 from 47.6 in April, its weakest level since February 2021. S&P Global said the sector was being hit especially hard by higher living costs and energy prices, which have reduced consumer spending power and weighed on demand.

New orders across the private sector also fell at the fastest pace in 18 months, with export orders declining at the steepest rate since January 2025. That broad weakness suggests the slowdown is not confined to one industry or one country, but is instead affecting much of the currency bloc.

The survey also pointed to worsening business sentiment. Confidence dropped to a 32-month low, and services firms were the most pessimistic since September 2022, according to RTE’s report. S&P Global said the data indicated the euro area economy could contract by 0.2% in the second quarter if the pattern continues.

The figures matter because the eurozone’s services sector is a key driver of employment and household spending, making it a closely watched barometer of consumer demand. With output, orders and confidence all weakening at the same time, the survey suggests firms may remain cautious in the months ahead as they assess demand conditions and persistent cost pressures.