Eurozone manufacturing activity remained in expansion territory in May, but momentum softened as rising energy costs and supply disruptions linked to the Middle East conflict began weighing on the sector. PMI Manufacturing was finalized at 51.6, down from 52.2 in April, while the output index eased from 52.3 to 51.3. Although the figures marked a fourth consecutive month of expansion, they also suggest the recovery is losing some strength as inflation pressures intensify.
According to S&P Global’s Chief Business Economist Chris Williamson, manufacturers are increasingly struggling under the impact of higher input costs and worsening supply chain conditions. He noted that energy and raw material prices surged again in May, driving the largest monthly increase in production costs in four years.
At the same time, supply-chain delays rose to their highest level since the pandemic-related disruptions of 2022, adding further pressure on firms. Williamson warned that factories are being forced to pass higher costs onto customers, a process that will “inevitably drive up inflation in the coming months.”
The challenge for policymakers is that inflation and growth signals are moving 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 rising prices.
| Indicator | Previous | Latest |
|---|---|---|
| PMI Manufacturing | 52.2 | 51.6 |
| PMI Manufacturing Output | 52.3 | 51.3 |
