Euro Zone Business Activity Contracts for Second Month

The European Union private sector activity fell to 48.5 in May as surging inflation and waning demand triggered the sharpest output contraction in 18 months. The data indicates a potential 0.2% quarterly GDP decline for the euro zone during the second quarter. This puts the European Central Bank in a difficult position as it weighs interest rate hikes to combat 3.2% inflation despite a stalling economy.

### PMI Data Signals Looming Contraction The Composite PMI Output Index from S&P Global fell to 48.5 in May, down from 48.8 in April. While this beat preliminary estimates of 47.5, any reading below 50.0 confirms the sector is shrinking. Output has now declined for two consecutive months.