Euro Zone PMI Falls to 47.5 in May as Iran War Drives 4% Inflation Risk

6 articles · Updated · Reuters · May 21

47.5 — the euro zone’s composite PMI fell from 48.8 in May, marking a second straight month of contraction and the weakest reading since October 2023.
Energy costs from the Iran war hit demand hardest in services, where activity dropped to 46.4, while input prices rose at a 3.5-year high and S&P Global said inflation could run near 4% in coming months.
New orders fell at the fastest pace in 18 months, export orders posted their steepest drop since January 2025, and companies cut jobs for a fifth month at the sharpest rate since November 2020.
Germany contracted for a second month, France’s headline PMI hit a 5.5-year low, and British firms logged their broadest activity drop in over a year as war effects mixed with domestic political uncertainty.
The European Commission cut its 2026 euro-zone growth forecast to 0.9% from 1.2%, while investors still expect a 25-basis-point ECB rate hike in June despite rising recession risks.

From optimism to recession fears in months, how did economists get Europe's 2026 forecast so wrong?

With the Iran war choking energy supplies, can Europe’s green transition prevent a long-term economic crisis?

The Strait of Hormuz is blocked. Which nations face the biggest threat from this escalating global energy shock?