Overview
- The flash PMIs released on May 21 showed the euro zone composite PMI at 47.5, marking a second consecutive month below 50 and signaling a likely 0.2% contraction in the second quarter.
- France and Germany drove the regional weakness with France's composite at 43.5 and services at a 66‑month low while Germany recorded a second month of contraction and faster input‑price inflation tied to Strait of Hormuz disruptions.
- Survey respondents across Europe and Australia cited the Middle East war for vessel delays, supply shortages and higher fuel costs that pushed input‑price inflation to multi‑year highs and hit new orders and confidence.
- Outside Europe, Japan’s manufacturing-led expansion eased with the composite at 51.1 and selling prices rising at near‑record rates, India stayed strong at a 58.1 composite despite slower factory momentum, and Australia’s private sector slipped into contraction at 47.8 with record‑low business sentiment.
- The PMI readings signal rising downside risks to employment and suggest central banks face a hard choice between tightening to curb inflation and easing to support weakening activity.